The layoffs sweeping tech companies are 'contagious' and 'may get worse,' Jefferies analyst predicts
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- Tech layoffs have swept the nation since the start of 2024, with over 34,000 workers laid off.
- The layoffs aren't ending anytime soon, according to a Jeffries analyst.
- Companies are putting their money into AI and cutting down in other areas to show discipline.
It may seem like tons of tech companies are laying off employees this year.
Well, that's because they are — and they're showing no sign of stopping, according to a Jefferies analyst.
"The lay-offs are going to continue and it may get worse. It's become contagious," Brent Thill said in an interview with FT published Sunday.
Google CEO Sundar Pichai already warned staff that more layoffs are coming in a staff email last month, after several hundred layoffs so far this year.
Over 140 tech companies have cut staff, totaling 34,250 layoffs since the start of 2024, according to tech-layoff tracker Layoffs.fyi.
While that may sound like a high number, it pales in comparison to last February, when tech companies cut a total of 140,000 workers as the industry grappled with pandemic-era overhiring.
This year, fewer employees were impacted, but the layoffs feel never-ending as tech giants like Amazon and Google consistently make small cuts in different sectors. Amazon had layoffs this year in its Buy with Prime department, along with Prime Video, and Amazon MGM Studios.
Amazon employees are now bracing for more layoffs after news broke that as many as several hundred jobs will be cut from One Medical and Amazon Pharmacy.
Additionally, Google cut several hundred roles across various teams this year, including Assistant, knowledge and information product teams, the hardware team, and central engineering.
A Google spokesperson said the company is investing in its "biggest priorities and the significant opportunities ahead." Google is continuing to support impacted employees as they look for new roles at the company, according to the statement.
January layoffs are common, but many of these cuts appear different because companies that seem to be doing well, like Microsoft and Meta which have launched major AI platforms and recently reported their highest earnings, are also partaking in staff cuts.
Microsoft cut 1,900 roles in its gaming division this January despite reporting record-breaking revenue for its final quarter of 2023.
Microsoft Gaming CEO Phil Spencer said that the layoffs were part of a greater "execution plan" to reduce overlap within the company, CNBC reported.
According to the FT report on Sunday, companies may be continuing to make cuts so that they can invest in new areas, like generative AI. Additionally, tech companies might want to show investors that they're focusing on cost discipline, per the same report.
For companies like Meta, this tactic seems to be working.
Meta announced additional cuts in January after reducing its staff by 22% over the last year. The decision to do so sent their stocks up by 12% to $450 a share at its peak in January.
Even though Meta said it was done with layoffs in 2023, CEO Mark Zuckerberg has labeled 2024 as the '"year of efficiency" and has already eliminated a manager role at Instagram with more in that role expected.
The strategy may even lead to a revival of the Metaverse, which was previously viewed as a failure in the tech world.