Mass layoffs, cuts and uncertainty: why is the tech industry experiencing one of the worst years in its history?

Last month, Meta announced its second consecutive quarter. to fall Incomesomething that has never happened since the company went public in 2012. With the decline of Mark Zuckerberg’s empire in the first place, the bad results of the third quarter showed growing problems for a tech industry that has so far been accustomed to almost 20 years of uninterrupted operation. growth.

Silicon Valley’s decline is incomprehensible without considering it. economic turmoil. Rising inflation and interest rates, the energy crisis, supply chain problems and recessionary winds paint an alarming picture.

In this context, companies try to reduce costs and is the first ad. Since this is the business engine of most digital businesses, the current scenario assumes a torpedo directly at the waterline. This is Meta’s case, 98% of its revenue is dependent on ads whose effectiveness is affected by a change in Apple’s privacy policies, as well as cookies and European regulations.

stock market crash

Bad expectations caused sharp drops in the stock market. So far in this dire 2022, the value of Meta has dropped by 70%. Even the Italian chocolate maker Nutella is now more valuable than the king social networks. No ‘Big Tech’ survived this blow. Amazon fell 43%, Alphabet (owned by Google) 35%, Microsoft 28% and Apple 21%. Others like Snap, Netflix, Tesla or Nvidia fell 78%, 54%, 52% and 49% respectively.

Experts point to a cultural shift in Silicon Valley. “There has been a bubble in the valuations of these companies. For more than a decade, we’ve believed that its growth could be endless, but that’s not the case,” says technology analyst Antonio Ortiz, who says his businesses’ surge in growth and profitability has been a “blow of truth” after the pandemic.

The company that best resisted the current scenario is Apple. Estimated at $2,278 trillion, the Cupertino firm is by far the most powerful in the tech industry, worth roughly the same as Meta, Alphabet (Google) and Amazon combined. Ortiz, author of the ‘Error 505’ newsletter, Apple’s live business responds to its ‘abuse of power position’so “its main threat is regulation rather than economic crisis.”

large cuts

This uncertainty about 2023 has currently weakened the results of some tech companies. they try to tighten their belts according to the template cuts. The wave of layoffs is affecting all kinds of companies. In addition to Meta and Twitter, Microsoft, Snap, Shopify, Coinbase and Stripe laid off nearly 1,000 employees, Lyft 680, Netflix 450, and Tesla and Oracle each laid off 200 more. Although they are currently avoiding layoffs, giants such as Apple, Amazon or Qualcomm have taken measures such as freezing hiring. Others, such as Intel or Cisco, plan to lay off up to 1,000 workers in the coming weeks.

This wave of layoffs is happening because of the bad results of the third quarter of the year and as many of these companies are preparing to close the fiscal year. Shooting now will make them have reduced costs for the next year and became more efficient. Experts point out that part of the tech industry may join the layoffs to join the trend of major players.

Regardless, these layoffs, which are dramatic for employees, will help companies keep their investors happier. Shares of Meta rose more than 21% without further progress after learning of its plan to lay off 11,000 employees, the largest in the industry. A recovery phenomenon that has already spread to other companies in the industry. Still, Ortiz warns that the bad moments experienced by big tech companies could be a warning to seafarers: “They may be waiting for the 2023 crisis”.