An employee cleans a window at Apple Inc.’s new Canton Road store. in the Tsim Sha Tsui district of Hong Kong, China.
Xaume Olleros | Bloomberg | Getty Images
Many of the largest tech companies are laying off staff as recession fears mount. But the job cuts come after a few years of rapid expansion.
On Wednesday, Microsoft announced it will cut 10,000 employees, cutting headcount by 5%, and Amazon began layoffs that will eventually cut 18,000 jobs.
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Microsoft and Amazon join tech industry peers including Alphabet and meta who have also cut staff in recent months.
While every company is slightly different, most companies facing layoffs blame macroeconomic conditions and the possibility of a future recession as the reason for tightening their trouser legs.
But an underappreciated factor is how quickly tech companies have been hiring more people over the past two years.
In 2020, the widespread Covid lockdowns made internet applications more important to people, boosting business for many tech companies. As sales and profits continued to soar in 2021, they continued to add huge numbers of employees in hopes that the success they saw would become a new foundation. It didn’t work that way. Growth is slowing and companies must now adapt.
Apple is a major exception: The company hasn’t noticeably increased its hirings in the past two years, nor has it announced any layoffs.
A survey of SEC filings shows how fast the other largest tech companies grew during the pandemic.
Microsoft had 221,000 full-time employees at the end of June 2022, the most recent official figure available. That was a jump of 40,000 employees from the same time in 2021, a 22% increase in staff. The year before, 18,000 employees were added, an increase of 11%.
In a note on the layoffs at Microsoft, Wedbush analyst Dan Ives said the technology sector had to spend money during the pandemic to keep up with increased demand.
“Redmond, along with the rest of the tech sector, had to aggressively hire and spend like ’80s Rock Stars to keep up with the eye-watering demand,” Ives wrote in a Wednesday note.
Amazon is more complicated than Microsoft because it has a huge hourly workforce for its warehouses, as well as the office workers of most tech companies.
Still, Amazon grew voraciously in 2021, adding 310,000 jobs. That followed an even bigger expansion in 2020, when it grew by more than 38% and attracted half a million employees.
In total, Amazon reported 1.6 million employees at the end of December 2021, of which approximately 300,000 are corporate jobs.
An Amazon executive said in a memo to employees on Wednesday that expansion in the Covid era was one of the reasons for budget cuts.
“During Covid, our number one priority was to scale to meet the needs of our customers while ensuring the safety of our employees. I am incredibly proud of the work this team is doing during this time,” Amazon retail chief Doug Harrington said in a statement. memo obtained by CNBC. “While other companies may have been averse to the short-term economy, we prioritized investments for customers and employees during these unprecedented times.”
meta (formerly Facebook) has grown its workforce by thousands of employees each year since going public in 2012, according to SEC filings.
In 2020, Meta added more than 13,000 employees, a 30% increase and the largest year of hiring in the company’s history. In 2021, another 13,000 employees will be added. Based on total number of employees, it was the two largest years of expansion in Facebook’s short history.
Alphabet, formerly Google, hasn’t cut as many positions as other large-cap companies, but in recent weeks it has cut 240 positions at Verily, its health sciences division, and laid off 40 at Intrinsic, a robotics division.
But while Alphabet’s recent cuts are much smaller than some other companies, the growth has been just as massive.
In 2020, Alphabet added more than 21,000 employees, or a 15% increase over the year to a total of 156,500 employees. In 2020, more than 16,000 employees were added, or an increase of almost 14%.
However, that growth pre-dates the pandemic, as Alphabet has expanded its workforce by at least 10% each year since 2013 and also added 20% new hires in 2018 and 2019.
Apple grew much more slowly during the pandemic. In fact, Apple’s hiring has followed the same general trend since 2016 in recent years.
As of September 2022, Apple had 164,000 employees, both its own workforce and retail staff for its stores. But that was only a 6.5% increase over the same period in 2021, representing a real growth of 10,000 employees. Apple also hired wisely in 2020, employing less than 7,000 in the year before September 2021.