- Amazon, Microsoft and Google announced layoffs of a total of 40,000 employees this week.
- These companies went on hiring sprees during a pandemic boom, but now they are cutting back.
- It’s a sign that this era of tremendous growth is over and that companies are resetting their priorities.
The past week was brutal for Big Tech employees.
In the past three days, three of technology’s biggest companies have started or announced layoffs affecting over 40,000 workers.
On Wednesday, Microsoft announced plans to lay off 10,000 employees by March as Amazon began emailing layoff notices to more than 18,000 employees. On Friday, Google CEO Sundar Pichai announced that the search giant will cut 12,000 employees.
“It’s a bloodbath,” said one Microsoft employee.
Tech companies embarked on a massive hiring spree as the Covid era turned their products into the backbone of the world’s telecommuting offices. But that record hiring made a dent in these companies’ bottom lines. As the economic conditions are bad, the Big Tech companies are reducing some of that number of employees.
Those companies found themselves in a “very different economic reality,” Evercore analyst Mark Mahaney wrote in a note.
As employees reel from fears of layoffs that have reached a new high, many predict an industry that will be irrevocably changed: On the other end, an industry less focused on hyper-growth will emerge, with more stable share prices, trimmer numbers, and for employees , much slimmer compensation.
Microsoft and Amazon did not comment, while Google did not respond to a request for comment.
Many Googlers feared layoffs when companies let go of employees last fall. This week, that fear came true.
Last fall, when companies like Amazon and Meta began cutting jobs, it looked like Google would hold out. The company prides itself on being employee-friendly and had never previously made mass redundancies.
But Googlers still wondered if they would be next. Rumors of layoffs circulated internally and employees would post memes on an internal Memegen page about how they were anxious about possible layoffs to come.
When employees asked CEO Sundar Pichai about the possibility of layoffs last year, the CEO was mum. “[It’s] It’s hard to predict the future,” he told employees in December.
More recently, employees said fears were heightened when Alphabet’s healthcare arm, Verily, trimmed 200 workers on Jan. 11, along with Microsoft and Amazon’s layoff announcements.
“When we saw the layoffs from Microsoft and Amazon, it was inevitable that it would come our way,” said a former Google recruiter who was fired on Friday.
The employee first learned of the job cuts from news reports before discovering they had been laid off after checking their personal email accounts. Later in the day, they found out that their manager was also let go.
Another Googler, who worked as a recruiter, said they woke up to a flurry of texts from friends asking if he was OK before realizing his work email had been disabled.
“We were in the dark,” the recruiter said.
While last fall’s layoffs occurred at companies like Amazon, Meta, Snap and Twitter that rely on online advertising for revenue, cuts at Google are a sign that the online advertising business is getting worse.
Pichai told employees that these recent layoffs reflected the company’s priorities for the coming year.
“We have conducted a thorough review across product areas and functions to ensure that our employees and roles are aligned with our highest priorities as a company. The roles we are eliminating reflect the results of that review,” Pichai wrote in a note.
Although Google Cloud had some layoffs, it was very little affected compared to other teams, an employee familiar with the team told Insider, possibly a sign that the company will continue to invest in its Cloud business as the announcement slows.
Google may also prioritize employees useful in maintaining its dominance in AI fighting the threat from Microsoft-backed OpenAI, which produced ChatGPT. According to the New York Times, the company is preparing to launch over 20 new AI products and build chatbot capabilities into its search engine.
ChatGPT is not an “existential risk” for Google, but it does show a “sign of urgency,” Mahaney wrote in a note to clients.
Microsoft may invest $10 billion in OpenAI’s ChatGPT, it’s still letting go of 10,000 employees over the next quarter
Early Wednesday, Microsoft CEO Satya Nadella sent an email to employees informing them that the company intends to cut 10,000 jobs by March. Some employees noted that rumors of layoffs had been circulating for some time as executives missed important meetings the day before.
That morning, an affected employee said they then met with a VP who informed them they would be let go and later received severance package details.
Several employees said their managers were in the dark about the plans, including one person who said they were the first to tell their manager they were laid off.
While the company expects to reduce its workforce in the spring, the divisions immediately affected included the team responsible for the Bing search engine and the Edge Browser, known internally as WebXT. Others affected include members of Microsoft’s hardware division including the Surface Hub, along with gaming, sales, recruiting, human resources and consulting roles.
The company cut at least 1,000 jobs the day it announced the layoffs.
The timeline has put many employees on edge, waiting to find out who will be next.
“Morale is definitely low across teams,” said another Microsoft employee. “All the shuffling makes it hard to be productive.”
To help managers deal with employee emotions, the company sent an email with phrases and tips they could use to communicate with employees about downsizing. The email guided managers to “show empathy and compassion” while telling employees “we must continually ensure we are aligning the right resources to the right opportunities.”
An executive briefed on the company’s layoff plans said managers were being asked to identify employees who could be let go in the coming months and others to be put on performance improvement plans. Microsoft has previously told Insider that this is not an enterprise-wide guide.
While the company’s operating system, Windows, experienced headwind growth as the remote work boom ended, its cloud division, Azure, is still growing, albeit below expectations. The company also still has plenty of cash to potentially make an acquisition to add to its spread of enterprise technology offerings like Azure Cloud, Office 365, LinkedIn and GitHub. Microsoft will also invest $10 billion in OpenAI, the organization that develops ChatGPT.
“Investors can expect to hear more about Microsoft’s big vision,” Dan Morgan, senior manager at Synovus Bank, wrote in a note.
At Amazon, some employees called a union in the wake of layoffs
On January 4, Amazon CEO Andy Jassy announced that the company will cut 18,000 jobs, mostly in human resources and its retail operations.
That was after members of the press reported about 10,000 job cuts across retail and Alexa voice assistant divisions last fall.
The dismissals began on Wednesday.
Amazon HR chief Beth Galetti in an email to employees on Wednesday reiterated that most of this year’s restructuring will affect the retail division – Amazon stores – and HR – the human experience and technology departments.
On Wednesday, Amazon employees learned they were being laid off via email.
“Unfortunately, your role has been eliminated,” Galetti wrote in one of the emails seen by Insider. “You are no longer required to perform any work on Amazon’s behalf with immediate effect.”
Many Amazon employees were upset by the ambiguity and lack of communication in the overall downsizing process. As the layoffs began, employees took to an internal Slack channel to compile a list of affected teams, with some expressing the need for a union for corporate workers, as Insider previously reported.
Amazon’s cloud unit was largely spared, according to several Amazon Web Services employees who spoke to Insider.
The era of tech companies acting like rock stars is over
Over the past decade, Big Tech companies spent money “like 1980s rock stars,” wrote Dan Ives, CEO of investment firm Wedbush.
Now it is cutting costs to weather a potential economic recession.
On the other end, tech companies may look a lot different this decade than they did last. As companies like Google, Amazon and Microsoft cut costs, they will find ways to operate leaner and their stock prices will stabilize. This could restart the “next growth cycle” in the coming years, Ives wrote.
These workforce reductions can also reset compensation. Stocks have long been an important part of Big Tech compensation, but the giants have seen the value of their stock decline. This will cause a domino effect across the industry as well, as startups will be able to hire employees, including those recently laid off, for lower compensation packages and as stock options fall in value.
As Ives noted, Silicon Valley’s “hypergrowth” era may be over — at least for now.
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