Pre-pandemic, tech-related companies saw a spike in job recruitment due to a positive projection of the tech industry. Amid the pandemic, there was a surge in user traffic in e-commerce and content creation, which increased the revenue of companies like Amazon by almost 38%. Because of the virility of COVID-19 at the time, remote work became a viable option for companies to provide to their employees. This, however, would not last long due to a myriad of factors that stunted the growth of the companies.
The pandemic brought about supply chain issues and a rise in global inflation. This meant tech companies had to spend more to sustain their infrastructure and workers. An aftereffect of this meant higher interest rates which reduced high-growth future earnings estimates. The war in Ukraine did no favours in quelling the rising inflation rate and only drove the cost of fuel upwards and the cost of living with it.
From March 2023 alone, Amazon was the biggest company to lay off almost 9000 of its employees. It had laid off 18,000 on January 5th, with two of its services (AmazonSmile and DPReview) shutting down with them. The affected units were AWS, Twitch, and Advertising. AWS was expected to be an omitted division from the layoffs. Still, its growth trajectory of late was considered incredibly steep because companies were looking to cut costs due to the economic downturn. This meant less money was spent on technologies like cloud computing.
Microsoft laid off a team of 10,000 people, nearly 5% of its global workforce, dedicated to guiding AI innovations. Meta would soon follow suit and lay off 10,000 people from its workforce and an additional 5,000 open roles that it had yet to fill. January and February saw a total layoff of 84,714 and 36,491 employees respectively from various tech companies such as GitHub, Yahoo, Dell, and Zoom. Twitter is a special case, considering the recent takeover of Elon Musk last year. Employees either walked away or were laid off, reducing the workforce of the tech giant by half, or roughly 3700.
Because of how globally far-reaching some of these companies are, it meant that Africa was not spared from the layoffs. Meta’s East African content moderation hub, Sama, was shut down, affecting a possible 1,500 staff from the Nairobi-based company. It was responsible for moderating and handling some of the graphic and harmful material on Meta’s platforms within that region. As of March 29, at least 120,000 people have been laid off from tech-related companies across the globe.
“Over the past two years, we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.” Google’s CEO, Sundar Pichai, summarised the harsh realities in his letter informing Googlers about its layoffs.
None of this means the tech industry is slowly losing steam or has become a fruitless investment industry. But the aforementioned companies overestimated their projections and growth trajectory.