Tech Layoffs Continue, Signaling a Shift in Focus
The tech industry is still experiencing layoffs as the year begins, but experts suggest it may be a sign of a broader strategic shift toward efficiency and investment.
Over 50 tech companies, including Meta, Microsoft, and Workday, have already announced staff reductions. According to layoffs.fyi, these cuts impact over 13,000 workers. Andy Challenger, a senior vice president at Challenger, Gray and Christmas, an outplacement firm, shared his insights. “I anticipate that we’ll continue seeing job cuts in tech.” Challenger expects the pace to slow but doesn’t believe the trend is over.
BDO, a Chicago-based accounting, tax, and advisory firm, revealed survey results indicating that 62% of tech CFOs plan layoffs this year. The primary goal is to foster sustained, profitable growth within the industry.
Job Cuts and Hiring: A Dual Approach
Despite the planned layoffs, many companies are also planning to expand their overall headcount. Hank Galligan, BDO’s national technology industry leader, explained that companies are shrinking some teams to improve efficiency, “while putting those dollars and resources that are saved into other areas.” IT is the most common department tech firms are looking to hire staff in, according to the study, followed by Finance.
Galligan highlighted that tech CFOs maintain a focus on profitable growth. They focus on being able to constantly measure profitability.
Efficiency Drives Restructuring
The tech sector saw significant headcount growth during the COVID-19 pandemic due to increased demand for IT products and services. According to a September report by AlixPartners, a New York-based consulting firm, the sector is still using job cuts to boost efficiency and free up funds for initiatives like artificial intelligence (AI).
The report noted that these investments in AI come “at the expense of other strategic initiatives at a time when tech companies are already navigating a high-interest-rate environment, ongoing efforts to course-correct overhiring during the pandemic, and a deceleration in the market growth rate.”
To invest in AI and other growth initiatives, companies will begin by reducing unnecessary costs.
Workday’s Restructuring Plan
Workday, a major enterprise software company, recently revealed plans to eliminate about 1,750 positions, or 8.5% of its workforce. The company’s restructuring plan aims to prioritize its investments. It aims to foster an “ongoing focus on durable growth,” as stated in a securities filing.
In a memo to staff included in the filing, Workday CEO Carl Eschenbach called the layoff a “difficult, but necessary, decision.” He continued, “Companies everywhere are reimagining how work gets done, and the increasing demand for AI has the potential to drive a new era of growth for Workday.”
Workday is expecting to continue to invest and hire in its key strategic areas and locations throughout its fiscal year, ending January 31, 2026.
Meta’s and Microsoft’s Strategic Adjustments
In mid-January, Mark Zuckerberg, Meta’s CEO, informed employees about a plan to cut about 5% of its workforce. According to a Bloomberg report, the cuts would focus on the lowest-performing staffers. Zuckerberg stated that 2025 will “be an intense year” for the company.
Business Insider reported that Microsoft was planning job cuts in early January, and taking a “harder look” at under-performing employees as part of the effort.
Other major tech companies that announced layoffs this year include Salesforce and Amazon.
Transitioning from ‘Right-Sizing’ to ‘Remixing’
The trend of tech layoffs seems to be easing up. Last year, companies announced a total of 152,104 layoffs. This is a decrease from the over 260,000 layoffs announced in 2023, according to layoffs.fyi. In the first month of this year, about 2,400 layoffs were announced by the sector, compared to over 34,000 during the same period a year before.
Analysts suggest that the slowdown reflects a shift away from tech layoffs driven primarily by the need to “right-size” bloated staffs. According to Galligan, “Now what you’re seeing is more remixing, based on, let’s say, the efficiency you might gain through investing in AI or some other technology.”
Challenger stated that layoffs aren’t likely to return to peak levels in the coming year, “It really was such a unique phenomenon following Covid,” he said. “Companies hired so many workers that they ended up not needing, so they had to make these huge reductions.”
