The US tech companies that once grew without restraint, such as Amazon and Facebook, have resisted the temptation to hire to withstand turbulent times.
Internet giants that experienced business booms during the pandemic are now suffering from inflation, war, supply-line troubles, and people returning back to pre-Covid lifestyles.
Big tech firms reported earnings in the first three months of 2015, which was a common theme.
Meta, Facebook parent, stated to analysts that the company was changing its hiring goals in order to continue to see a bright future.
“We regularly re-evaluate our talent pipeline according to our business needs, and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly,” a Meta spokesperson told AFP.
“However, we will continue to grow our workforce to ensure we focus on long-term impact.”
Amazon, a Seattle-based company, is America’s second largest employer. It ended last year with more workers than it had in 2019, and its ranks are now overly bloated.
As the spread of the Omicron variant of Covid-19 slowed during the first quarter of this year and workers returned from time off, Amazon “quickly went from being understaffed to overstaffed,” chief financial officer Brian Olsavsky told analysts.
Twitter confirmed that it had suspended all hiring and even showed some senior executives the exit as it faces Elon Musk’s takeover. Musk is the richest person in the world.
Musk sent mixed messages Friday regarding his proposed Twitter acquisition.
In an early-morning tweet, Musk said the $44 billion takeover was “temporarily on hold,” pending questions over the social media company’s estimates of the number of fake accounts or “bots.”
Two hours later, the unpredictable Tesla chief executive tweeted that he was “still committed to acquisition.”
“Our industry is in a very challenging macro environmentright now,” Twitter chief executive Parag Agrawal said Friday in a tweet.
“I wont use the deal as an excuse to avoid making important decisions for the health of the company, nor will any leader at Twitter.”
At ride-share pioneer Uber, CEO Dara Khosrowshahi said they will “treat hiring as a privilege,” according to an email to employees seen by CNBC.
Big tech companies have avoided budget-driven layoffs. However, this is not the case with stock trading platform Robinhood or Cameo. Cameo sells custom videos from celebrities.
Robinhood stated in April that it would cut almost 350 positions, which is 9 percent of its workforce. According to The Information news website, Cameo terminated the employment contracts of 80 employees.
The reasons behind the cuts
There are many reasons to hire curbs, freezes, and cuts.
Meta, for instance, attributed some of the blame to an Apple tweak to its mobile software that blocks the collection of user data in order to target ads more effectively.
Uber reported that it suffered a significant loss in the first three months despite a rebound of its ride-share business.
According to the earnings report, the loss was almost entirely due to the revaluation in Grab and Didi in Asia as well as US-based autonomous driving company Aurora.
However, many internet firms shared a common factor: the rapid hiring that took place during the pandemic caused overstaffing in less time.
“Many tech companies have been fulfilling this demand with notable growth in digital services, and as such, recruited and grew their business notably during the past two years,” said Terry Kramer, an assistant professor at the UCLA business school.
“A reasonable part of what we’re seeing now I believe is the normal maturity of technology adoption where companies can’t/don’t need to continue growing at the same rate.”
Inflation is another factor that weighs heavily. It has driven up overall costs and tightened consumer budgets.
Companies are now more likely to borrow money from the US central bank, which has been increasing interest rates steadily this year.
On Wall Street, an S&P 500 index comprising tech sector stocks has fallen more than 22 percent since the start of the year, and the tech-heavy Nasdaq is down slightly more overall.
Daniel Ives, a Wedbush analyst, advised investors to not fear a repeat of the Dot-com crash in the late 1990s.
“This is not a Dot-com Bubble 2.0,” Ives said in a note to investors.
“It’s a massive overcorrection in a higher rate environment that will cause a bifurcated tech tape, with clear haves and have-nots.”
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