Rising Tech Layoffs Could Lead To Improved Profitability

Layoffs are often viewed as a negative sign because companies typically layoff employees when growth slows. However, some companies also layoff employees when consolidating business lines to increase profitability. This is especially true when the majority of the layoffs are sales staff, rather than employees who service existing and new customers.

Tracking Tech Company Layoffs

According to data from Layoffs.fyi, 2022 saw 164,969 tech layoffs across 1,063 companies. In 2023 thus far, that figure has grown to 249,354 layoffs across 1,113 companies which represents a 51% increase in tech employee layoffs. While some of these layoffs were a result of drastic downturns in business, others were a result of companies trying to increase profitability while retaining revenue streams.

How GOOGL And META Responded To Layoffs

Let’s take a look at Alphabet (GOOGL) and Meta Platforms (META). Alphabet cut 6% of its workforce in January and then went on to beat earnings in Q1, Q2, and Q3 of this year. Previously, in Q4 2022, Alphabet missed earnings by more than 12%. And there’s a similar story for Meta Platforms, the company cut 13% of its workforce in Q4 of 2022 and then followed up with another 13% cut near the end of Q1 2023. Meta Platforms had missed earnings by more than 21% in Q4 2022 but followed up with earnings beats in Q1, Q2, and Q3 of this year. 

It would seem as if the layoffs at Alphabet and Meta Platforms helped the two companies to consolidate existing business lines and enhance profitability. It’s also important to note that the companies have been able to grow revenue over the same time period that they increased profitability. This might indicate that the layoffs were done on unprofitable business lines and/or unsuccessful, or unprofitable, sales teams. As shown, Alphabet and Meta Platforms were certainly able to consolidate their business lines, enhance profitability, and grow revenue after conducting massive layoffs. This should definitely be something to consider the next time you hear about layoffs at large tech companies.