Interactive Investor

Google’s parent Alphabet adds to big tech job layoffs

20th January 2023 12:53

Victoria Scholar from interactive investor

The news follows announcements about job cuts at Microsoft, Amazon and other firms.

Alphabet (NASDAQ:GOOGL) has announced plans to cut around 12,000 jobs or 6% of its workforce, across geographies and teams. Shares in Google’s parent company are poised to open the session higher, rallying by more than 3.5% pre-market, buoyed by the prospect of a slimmed down cost base.

It comes just days after Microsoft (NASDAQ:MSFT) similarly said it intends to lay off 10,000 workers or almost 5% of its staff and Amazon (NASDAQ:AMZN) cut 18,000 jobs earlier in the month. Other tech names recently announcing plans to reduce staff levels include Facebook’s parent company Meta (NASDAQ:META), Twitter after Elon Musk’s takeover, and Salesforce (NYSE:CRM)

Digital spending is suffering, and ad revenues are falling with it, prompting tech companies, which not long ago were the darlings of the stock market, to reduce labour costs in preparation for the economic downturn.

Many investors were caught off guard when shares in the tech sector lost their shine at the end of 2021. Recent times have been tough for tech investors with shares in Alphabet down 30%,  Meta down 57% and Tesla (NASDAQ:TSLA) down around 60% over a one-year period with resultant job cuts in the sector almost an inevitability.

Silicon Valley’s sense of invincibility spurred a period of overzealous expansion during the era of rock-bottom interest rates. But the tech sector was swiftly brought back down to earth in 2022 on the back of rising inflation and interest rates, the fading technological boom during the pandemic-era when most of us were glued to our devices, and a slowing global economic backdrop. The strength of greenback has been another headwind for big tech’s overseas earnings when converted back into dollars. The result has been a raft of disappointing share price performances and an accompanying slew of job cuts.

Tech earnings season takes centre stage in the coming days, with Netflix (NASDAQ:NFLX) setting the bar high after its subscriber numbers soared past expectations, in part thanks to the Harry and Meghan docuseries as well as its new cheaper ad-supported more economically resilient subscription offer. Further job cuts could provide a tailwind to shares in the sector but with the Federal Reserve sticking to its rate-hiking path, the outlook remains uncertain.

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