Barely days after Twitter first announced its mass layoff, which saw a half of its workforce being fired, Meta followed suit. The company's founder Mark Zuckerberg said he has to let go of 13 per cent of its workforce, which is more than 11,000 people, after realizing that his decision to increase investments did not pan out the way he expected.
Before the shock wore off, Amazon and Disney have trodden the same path. While Amazon has decided to lay off thousands of employees to cut losses, Disney has detailed its plan to review spending at all divisions, cut costs and freeze hiring after its quarterly earnings plummetted to a whopping $1.5 billion loss.
While industry experts predict the gloom will change once the economic situation improves, fact remains that these big MNCs took the risk of growing too soon.
Who all laid off their staff?
Not just Twitter and Meta, but many other tech giants too resorted to firing sprees. According to The Kobeissi Letter, a platform that does weekly analysis of global capital markets, this is the biggest wave of tech layoffs since 2001.
While Apple has resorted to a hiring freeze, companies like Intel (20%), Snapchat (20%), Lyft (13%) and US-based video-sharing website Cameo (25%) too have resorted to sacking people.
In India too, ed-tech giant Byju's sacked 1,100 staff earlier in the year.
As per the data by Trueup Tech, a tech layoff tracker, there have been 1149 layoffs at tech companies with 183,832 people impacted so far in 2022.
What caused this?
Most companies attribute the layoffs to the aftermath of the Covid crisis. As Zuckerberg puts it, "At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected."
His public statement added that he was extending our hiring freeze through Q1 with a small number of exceptions.
Like Meta, most companies enjoyed the initial boom and hoped the trend would go on, as Zuckerberg himself confessed. None were prepared for the lull that ensued once the Covid wave subsided and people began going back to the offices.
Hoping the surge would stay, most tech giants aggressively hired people, the best in the market, for huge pay packets as competition became fierce. Even Twitter founder Jack Dorsey said he grew the company too quickly, while taking responsibility for the current crisis in Twitter.
Then there is the recession to blame.
With recession predicted to hit hard in the backdrop of the Russian invasion of Ukraine, many tech giants are bracing for the impact by resorting to layoffs and tightening their belts. The first step is to put the brakes on hiring, followed by cutting the workforce.
The current increase in interest rates, high fuel costs and supply chain issues have only accelerated the problem.
The future
Despite expectations, the prediction is that it might take some time for the situation to improve. Experts attribute this to the macroeconomic factors created by the trend.
Besides, many are still uncertain about the right balance between growth and profitability. This was evident during the last few years when the tech giants balanced the investors' cash flow by pouring it into expansion, focusing mostly on hiring and acquisitions.
"The pressure is to just spend the money quick enough so you can grow fast enough to justify the kinds of investments V.C.s want to make," Eric Rachlin, an entrepreneur, told The New York Times.
But, the silver lining is that the tech industry will rebound as many are starting to invest in new technologies and software.
