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 biggest tech companies are laying off staff as fears of a recession grow. But the job cuts come after a few years of rapid expansion.
Wednesday, Microsoft announced it would cut 10,000 employees, cutting its workforce by 5%, and Amazon began making layoffs that will eventually cut 18,000 jobs.
Microsoft and Amazon join their tech industry counterparts, including Alphabet and Meta which have also downsized in recent months.
While every company is slightly different, most companies experiencing layoffs blame macroeconomic conditions and the possibility of a future recession as the reason for their belt-tightening.
But one underestimated factor is how quickly tech companies have been hiring over the past two years.
In 2020, widespread Covid lockdowns have made internet applications more important to people, boosting the business of many tech companies. As sales and profits continued to rise in 2021, they continued to add large numbers of employees in hopes that the success they were seeing would become a new benchmark. It didn’t work that way. Growth is slowing and companies must now readjust.
Apple is a major exception: it hasn’t significantly increased its hiring rate over the past two years, nor has it announced any layoffs.
A review of SEC filings shows how quickly other top tech companies have grown 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 period in 2021, a 22% increase in headcount. The previous year, Microsoft had added 18,000 employees, an increase of 11%.
In a note on Microsoft layoffs, Wedbush analyst Dan Ives said the tech sector had to spend money during the pandemic to meet high demand.
“Redmond had to hire aggressively with the rest of the tech industry and spend money like the Rock Stars of the 1980s to keep pace with skyrocketing 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 head office workers found at most tech companies.
Yet Amazon has seen voracious growth in 2021, creating 310,000 jobs. This follows an even bigger expansion in 2020, when it grew by more than 38% and added half a million employees.
Overall, Amazon reported 1.6 million employees at the end of December 2021, of which about 300,000 are in corporate jobs.
An Amazon executive said its Covid-era expansion was one of the reasons for the cuts Wednesday in a memo to employees.
“During Covid, our first priority was to meet the needs of our customers while ensuring the safety of our employees. I am incredibly proud of the work of this team during this time,” said Amazon’s head of retail. , Doug Herrington, in a note obtained by CNBC. . “While other companies may have balked at the short-term economy, we have prioritized investing for customers and employees during these unprecedented times.”
Meta (formerly Facebook) has grown its workforce by thousands of employees every year since its IPO in 2012, according to SEC filings.
In 2020, Meta added more than 13,000 employees, a 30% increase and the largest hiring year in company history. In 2021, it added another 13,000 workers. By total number of workers, these are the two biggest 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 those of some other companies, its growth has been just as massive.
In 2020, Alphabet added over 21,000 employees, an increase of 15% over the year for a total of 156,500 workers. In 2020, it added more than 16,000 employees, an increase of almost 14%.
This growth predates the pandemic, however, as Alphabet has increased its workforce by at least 10% every year since 2013 and also added 20% new employees in 2018 and 2019.
Apple increased much more slowly during the pandemic. In fact, Apple’s hiring over the past few years has followed the same general trend since 2016.
As of September 2022, Apple had 164,000 employees, which includes both company employees and retail staff at its stores. But that was only a 6.5% increase over the same period in 2021, an actual growth of 10,000 employees. Apple also hired sensibly in 2020, adding less than 7,000 employees in the year to September 2021.