Big tech giants’ profits soar amid waves of mass layoffs

The past few weeks have been all about money matters for big tech giants. We’re talking about the world’s five biggest technology firms: Microsoft, Apple, Alphabet, Amazon, and Meta - firms leading the world in terms of earnings and stock market valuations. These tech giants have released their quarterly balance sheets, and they have reported billions of dollars in profits.

Take a closer look at these numbers. In the first quarter of this year, Microsoft’s profit climbed by 20 percent to more than $22 billion, competing with rival Alphabet at $23 billion. Amazon’s quarterly profits surged by over 200 percent to $10 billion. Meanwhile, Meta’s profit more than doubled in the last quarter. There was only one exception - Apple. The iPhone maker made less profit than last quarter, but nonetheless, Apple earned nearly $23 billion.

Mass layoffs in tech sector

But despite earning billions of dollars in profits, the big tech industry is in disarray.

In the past three months alone, there have been over 60,000 reported layoffs in the tech sector. From giant corporations to small startups, over 250 tech companies have fired employees en masse. These include the big tech firms.

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In January, Microsoft laid off 1,900 employees across its gaming division. Apple sacked close to 600 employees in April after reportedly abandoning its self-driving car project. Amazon and Alphabet also fired hundreds of workers across different business units. Meanwhile, Meta reportedly laid off at least 50 employees from its Facebook Messenger division.

Most of the big tech job cuts were in sectors that were not performing or were expected to grow at a slower pace. For example, Microsoft’s redundancies in its gaming division came amid a slowdown in the sector. The video gaming sector has seen a slump after the pandemic. Meanwhile, Apple let go of its electric car ambitions as the sector’s growth remains stalled.

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Why are tech giants laying off workers?

Analysts say there are two reasons for mass layoffs in the tech sector: cost cuts and firms’ transition to artificial intelligence.

As the 2020 COVID-19 pandemic pushed the world indoors, demand for tech products like social media and e-commerce apps skyrocketed. To meet these demands, tech giants hired thousands of workers.

As per a report, by the end of 2023, the five tech companies – Microsoft, Apple, Meta, Google, and Amazon – had 71 percent more workers compared to the pre-pandemic period.

However, the pandemic was followed by sky-high inflation around the world. People started cutting their expenditure on non-essential items. Online shopping habits drastically reduced, and as the outdoors began its pre-pandemic run, people were no longer spending hours scrolling on social media apps. For big tech firms, less engagement meant less revenue. Fearing a decline in profits, tech firms resorted to massive cost-cutting plans.

According to one data, between 2021 and 2023, Meta, Amazon, Microsoft, Google, and Apple collectively laid off more than 100,000 workers. This helped the companies save on their costs and therefore enhance their bottom lines.

Transition to artificial intelligence

Meanwhile, Wall Street now has a new obsession: artificial intelligence. Every other company wants to grow in the AI sector. From Meta to Microsoft, big tech firms are at the forefront of the AI race.

They are rushing to integrate AI into their tech products. For this, they have been hiring employees in fields like data science, software development, and cloud computing. In 2023, there were nearly 200,000 AI-related jobs in the U.S. And now that AI has entered the job race, the threats of AI-powered job automation have also increased.

Tech firms are now changing their growth paths. While they hire new talent in the artificial intelligence sector, companies are reducing workers in other parts of their business, and that has left thousands of workers threatened.

As AI has become a shiny new moneymaker for big corporations, news of mass layoffs has become an everyday phenomenon. And employees in the tech sector are scrambling to adjust to this new reality. Amid massive cost cuts and a rising threat of artificial intelligence, tech employees face a double whammy despite the big tech firms clocking in handsome profits.