Mass Layoffs in Big Tech: Is Winter Coming?

I witnessed the tech industry booming for years, with many of the most prominent players in the game becoming trillion-dollar companies and creating thousands of jobs. Meta (formerly known as Facebook) employs over 80,000 people, as recorded in 2021, Amazon has a workforce of 1.6 million , and Twitter is 7,500 strong at the end of October 2022.

But recently, we’ve seen these giants dramatically turn in the opposite direction. These past few weeks alone, we saw massive layoffs from some of the biggest tech companies in the world, with Meta announcing they would be cutting 13% of their workforce (that is 11,000 people), Twitter laying off around 66% of its global staff , and Amazon planning to layoff around 10,000 people in corporate and technology jobs.

The mass layoffs came as a surprise to me because I thought they were recession-proof industries. But now it seems these tech giants are not immune from the economic downturn… Just like everybody else.

So, the big question is: why is big tech firing people right now?

Why are Big Tech Companies Firing People Right Now?

The pandemic has significantly impacted many companies in different industries, but with Big Tech, things are more complicated.

For me, the most likely explanation for the mass layoffs is that these companies have grown too fast, and now they’re trying to ensure their growth doesn’t lead them to fail. Other vital reasons involve the following:?

1. High Inflation

Inflation affects the bottom line of any business, and tech giants are no exception. High inflation raised costs, making it harder to maintain profitability. Meta and Twitter revenues come primarily from digital advertisement businesses , and inflation means higher service prices. Overhead costs like wages, office rent, or product costs can also increase.

High inflation also impacts advertising spending, and most companies are canceling their ad budget to save on costs. In October, U.S. ad spending dropped 3.2% compared to the same period in the previous year.

2. Overhiring During the Pandemic

As I said earlier, companies have grown too fast, and they are laying off to make sure their growth doesn’t lead them to failure. Meta doubled its headcount to almost 87,000 in the past three years, and now stocks are down to nearly 75% compared to the past year.

Amazon increased its workforce by up to 1.6 million employees during the pandemic. It is because of the overwhelming demand for technology gadgets like Amazon Alexa while people are staying at home. Now that people are no longer restricted in their movements, the need for such technology dropped, and Amazon's operating income in the third quarter of 2022 fell by $2.4 billion compared to the previous year.

On the other hand, Twitter’s former CEO, Jack Dorsey, admitted that they grew the company too fast. “Folks at Twitter, past, and present, are strong and resilient. They will always find a way, no matter how difficult the moment is. I realize many are angry with me. I own the responsibility for why everyone is in this situation: I grew the company size too quickly. I apologize for that,” Dorsey posted on Twitter.

These companies overhired, and to keep the wheels rolling, they need to remove some of their pieces of baggage.

3. Fear of Recession

As posted on our website , unless the US Bureau of Economic Analysis declares it, a state of recession in the USA remains an opinion. Yet, these big tech companies expect a global recession, and the mass layoffs are preparations for what is coming.

In a memo obtained by CNN, Lyft (LYFT) founders Logan Green and John Zimmer circulated a message saying that a probable recession is coming sometime in the next year and rideshare insurance costs are going up.

4. Crypto Crash

The colossal collapse of cryptocurrency exchange FTX, which was once valued at $32 billion, has been tech’s most catastrophic meltdown in years. It’s indeterminate how many FTX employees will be affected, but other startups in the industry have also reduced their staff.

This year, Crypto.com has cut hundreds of jobs, and Coinbase (formerly based in San Francisco) has cut 18% of its staff. In addition, this month 60 more workers were reportedly laid off from Coinbase.

In June, CEO Brian Armstrong wrote: “A recession could lead to another crypto winter and could last for an extended period. In past crypto winters, trading revenue (our largest revenue source) has declined significantly.”

What It Means

As an employer myself, I find these challenges extremely concerning. Everyone should be aware of how changing economic conditions can affect their job security, and the tech industry is no exception. This serves as a reminder that we must be constantly prepared for any eventuality—whether it’s rapid growth or massive downsizing.?

We need to stay on top of things in order to survive and keep our jobs. We should also remember to be mindful of our own financial situation, and make sure that we have a plan in place.

In these trying times, it’s important to stay alert and aware of the external environment. This will help us adapt quickly in order to ensure our job security and safeguard our future economic prospects.?

It is also wise to take this as a signal to show that even the most powerful tech companies can face severe consequences due to high-risk growth strategies. Therefore, we must remember that sustainable, responsible growth is the only safe option for any business. We must focus on building long-term resilience rather than short-term gains.

The bottom line is that the gig economy will continue to face its own share of challenges, and we must be prepared to handle them. There is no one-size-fits-all solution, but with the right amount of knowledge, awareness, and planning, we can ensure our survival in a volatile economic landscape.

Thanks for reading! Make sure to leave your thoughts about it in the comments.?

If you enjoyed this article and found it helpful, please support me by subscribing to my LinkedIn newsletter!