Most of the companies that thrived during the pandemic are now facing major challenges due to a combination of factors, prompting them to lay off tens of thousands of employees in 2022.
The layoff announcements started earlier this year, and they came first from small and medium-sized businesses, but now the wave of layoffs has hit tech giants like ‘Meta', ‘Amazon', ‘Uber' , 'AirB&B', 'Netflix' ' and 'Microsoft', to the extent that a website, layoffs.fyi, has been set up that tracks all job losses, which exceeded 150,000 this year.
While every business has its own reasons, there are common factors putting pressure on the industry, the first of which is that many of these companies have hired thousands of employees during the pandemic in response to growing demand for their services and the hope that the ultimate digital lifestyle.
For example, 'Meta' has hired more than 15,000 employees in the first 9 months of the current year, but a few weeks ago Mark Zuckerberg, the founder of the company, announced that he would lay off 11,000 employees, or 13% of the workforce , and 'Amazon' announced the layoffs of 10,000 employees in the largest layoff in its history.
Scott Kessler, a technical analyst, says these companies are facing reality, as they have faced several seasons of declining revenues, and everyone is asking what the company is doing to deal with tough performance, challenges and disappointing results, but also what is it doing in preparation for 2023, which will be difficult, and many companies Measures have been taken to lay off Twitter and Amazon, and the investment community would like companies to be more disciplined and austere.
Another factor is the cost of living crisis and high inflation rates, which in turn have led to a decline in online advertising and digital platforms, and some changes in the privacy rules of companies like Apple which have affected the advertising market.
Even in the financial services technology sector, companies have taken a hit from higher interest rates and investors have increased pressure on companies to cut their costs.
Technical analyst Scott Kessler explained that many of these companies invested during the pandemic for long-term growth, and didn't care about profitability. Financial, because investors won't wait 10 years to see investment results, they have to make difficult decisions.
Elon Musk, who has laid off half of Twitter's employees, is a proponent of cutting costs at his new company, which is facing challenges to grow its profits and add new users.
Some also believe that salaries and employee benefits in the technology sector are unsustainable and higher than in other sectors.
But what about the impact of all this on tech investors? The answer depends on the nature and size of the company: if the layoff is another step in the company's collapse, which is what smaller companies face, then such news will not restore investor confidence, but if the goal is to reduce costs, then this can be welcomed by investors because it can lead to improved profits.