An employee cleans a window at Apple Inc.’s new Canton Road store in the Tsim Sha Tsui district of Hong Kong, China.
Xaume Olleros | Bloomberg | Getty Images
Many of the biggest tech companies are laying off employees as fears of a recession mount. But the job cuts come after a few years of rapid expansion.
On Wednesday, Microsoft announced it would cut 10,000 employees and reduce its workforce by 5%, and Amazon began layoffs that will eventually eliminate 18,000 jobs.
Microsoft and Amazon join tech industry peers, including alphabet Spirit Meta who have also reduced staff in recent months.
While every company is slightly different, most companies being laid off cite macroeconomic conditions and the possibility of a future recession as the reason they are tightening their belts.
However, one underestimated factor is how quickly tech companies have been hiring over the past two years.
In 2020, widespread Covid lockdowns made internet applications more important to people and boosted the business of many tech companies. As sales and profits continued to grow in 2021, they continued to hire large numbers of employees in the hope that the success they were seeing would become a new base. It didn’t work that way. Growth is slowing and companies are now having to realign themselves.
Apple is a major exception: the company hasn’t significantly increased its hiring rate in the past two years, nor has it announced any layoffs.
A review of SEC filings shows how quickly the other biggest tech companies have grown during the pandemic.
Microsoft had 221,000 full-time employees at the end of June 2022, the latest official number available. That was a jump of 40,000 employees from the same point in 2021, a 22% increase in the workforce. The year before, Microsoft hired 18,000 new employees, an increase of 11%.
In a note about Microsoft’s layoffs, Wedbush analyst Dan Ives said the tech sector has had to spend during the pandemic to keep up with increased demand.
“Redmond, along with the rest of the tech sector, has had to aggressively hire and spend like 1980s rock stars to keep up with overwhelming demand,” Ives wrote in a statement Wednesday.
Amazon is more complicated than Microsoft because it has a huge hourly workforce for its warehouses, as well as the corporate headquarters staff found at most tech companies.
Still, Amazon grew voraciously in 2021, creating 310,000 jobs. That was followed by even greater expansion in 2020, when it grew over 38% and added half a million employees.
Overall, Amazon reported 1.6 million employees at the end of December 2021, of which about 300,000 are employed by the company.
An Amazon executive said in a memo to employees Wednesday that Covid-era expansion was a reason for cuts.
“During Covid, our first priority has been scaling to meet the needs of our customers while keeping our employees safe. I’m incredibly proud of the work this team is doing during this time,” Amazon retail chief Doug Herrington said in a memo obtained by CNBC. “While other companies may have balked at the near-term economic cycle, we have prioritized investments for customers and employees during these unprecedented times.”
Meta (formerly Facebook) has added thousands of employees each year since going public in 2012, according to SEC filings.
In 2020, Meta hired over 13,000 new employees, a 30% increase and the largest year of hires in the company’s history. In 2021, another 13,000 employees were added. Measured by the total number of employees, these were the two largest years of expansion in Facebook’s short history.
Alphabet, formerly Google, hasn’t cut as many jobs as other large-cap companies, but in recent weeks it has cut 240 jobs at Verily, its health sciences division, and 40 at Intrinsic, a robotics division.
But while Alphabet’s recent cuts are much smaller than some other companies, its growth has been similarly massive.
In 2021, Alphabet hired over 21,000 new employees, up 15% over the year for a total of 156,500 employees. In 2020, over 16,000 employees were added, an increase of almost 14%.
That growth predates the pandemic, however, as Alphabet has increased headcount by at least 10% every year since 2013 and also added over 20% new employees in 2018 and 2019.
Apple grew much more slowly during the pandemic. In fact, Apple’s hiring has followed the same general trend for the past several years since 2016.
As of September 2022, Apple had 164,000 employees, including both corporate employees and retail employees for its stores. But that was only a 6.5% increase over the same period in 2021, which translates to real growth of 10,000 employees. Apple continued to hire wisely in 2020, hiring fewer than 7,000 employees in the year leading up to September 2021.
Correction: A previous version of this story misspelled Doug Herrington’s name.