Global Layoffs in Tech Sector and Reasons Behind Them

Quick Summary - Quick summary - After a wave of cuts in tech giants in the fall 2022, the sector was shaken by even more massive layoffs in January-February 2023. In this article, we analyze what is happening in the global and in Israeli hi-tech markets, and what reasons led to large-scale layoffs.

9 mins read

March 8, 2023

When it rains, it pours. Layoffs in the tech sector did not end in 2022 but came back with renewed vigor.

Global tech companies that are laying off in 2023

On February 10, 2023, Yahoo announced the cut of more than 20% of its workforce. This affects 1,000 people, the BBC reports.

On February 7, 2023, Zoom published a letter from CEO Eric Yuan to employees. “We have made the tough but necessary decision to reduce our team by approximately 15% and say goodbye to around 1,300 hardworking, talented colleagues,” – he said.

On the same day, EBay employees received a similar message. “I have some hard news to share,” – CEO Jamie Iannone said and announced a 4% layoff. About 500 people lost their jobs.

Just a day before, on February 6, Dell announced a 5% layoff. “What we know is market conditions continue to erode with an uncertain future,” – Dell co-chief operating officer Jeff Clark said in a message to the team. Given that the company employs 133,000 people, this cut affects 6,650 workers. 

This year’s wave of layoffs, which has reached tsunami proportions, began in January with announcements by giants such as Microsoft and Google.

“We’re living through times of significant change,” – Microsoft CEO Satya Nadella said. The corporation reported in January 2023 about plans to cut 10,000 jobs by the third quarter of 2023. 

“A difficult decision to set us up for the future,” – Google and Alphabet CEO Sundar Pichai announced 12,000 job cuts worldwide.

“I was too ambitious in investing ahead of our revenue growth,” – Spotify CEO Daniel Ek admitted in the announcement of a 6% layoff.

And these are only the most famous tech giants. In general, the number of businesses mass-laying off employees is in the hundreds. According to Layoffs.fyi, 385 tech companies cut more than 108,750 people in the two months of 2023. And the peak falls on January. For comparison, 160,997 people were laid off for the whole of 2022. And the biggest cuts were at such giants as Google, Meta, Microsoft, and Amazon.

How many people lost their jobs in tech in 2022-2023



Global layoffs 2022-2023

What is happening with the tech layoffs in Israel?

In February 2023, information appeared about Google’s plans of reducing the number of employees in the Israeli office, the Globes reported.

Over the last year, Israeli high-tech offices have said goodbye to thousands of employees. The Calcalistech keeps track of companies that laid off workers in 2022-2023. There are already more than 110 names on this list, and a third of them have made layoffs in 2023. Such companies as Fireblocks, HP, and Wix are among the most recent participants in the wave of cuts. 

Why is big tech facing massive layoffs?

Analyzing company statements, reports, and analyst reviews, the following main reasons can be summarized:

  • Oversaturation of tech hiring in previous years

In the pre-Covid year and even at the beginning of the pandemic, tech giants were hiring on an unprecedented scale. Demand for online services, electronics, and games remained strong, so the sector felt confident.

According to Meta’s Annual reports, the corporation increased its staff by 30% in 2020. And further, these figures decreased to 23% in 2021 and 20% in 2022 (including 11,000 already reduced employees). In 2020, Amazon hired 500,000 workers to reach 1.3 million people. In the following year, the number increased to approximately 1.6 million workers. But in 2022, the company tightened its belts, and the number of employees fell to 1.54 million people.

Companies hoped that the trends established by the quarantine would continue. But for now, one by one, the giants report a decline in consumer demand for online services. “We saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” – Microsoft CEO Satya Nadella said.

  • Inflation and global economic recession

According to the US Bureau of Labor Statistics, in June 2022, inflation reached a 40-year record high. Consumer prices rose by more than 9 percent. This stimulated a significant drop in consumer demand, and therefore companies were forced to cut costs. Typically, in such situations, the business, first of all, begins to reduce staff.

The global economic recession was also influenced by the consequences of the pandemic and Russia’s military invasion of Ukraine, according to the International Monetary Fund. In 2022, economic growth is estimated to slow to 3.2% in 2022 and 2.7% in 2023. “This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic,” – the report shows.

  • Rising interest rates and investor pressure

Trying to fight inflation in the US, The Federal Reserve raised interest rates 7 times in 2022. As a result, the indicator reached a 15-year record, according to CNBC. And these forces venture capitalists to set aside financing startups and risky industries.

On the other hand, investors require tech companies to cut costs. “Headcount is too high”, – TCI wrote in a letter to Google and Alphabet CEO Sundar Pichai in the fall of 2022. Shareholder called on management to take “aggressive action” to reduce the number of employees and cut payroll costs. 

  • Psychological factor

The reason for such a powerful wave of dismissals may be that CEOs copy each other’s decisions, Stanford Graduate School of Business Professor Jeffrey Pfeffer believes.  “The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing”, – he says. According to him, studies show that layoffs do not significantly reduce the costs, but rather harm business.

This is confirmed by the numbers. For example, Dell shares fell 3.6% immediately after the cuts were announced, the CBS reports.

Does all of this mean tech hiring is slowing down?

According to the CompTIA report, the number of job postings for tech workers started to increase again in January. The unemployment rate fell to 1.5%. This shows that many dismissed workers have already found new workplaces. In addition, a large number of laid-off employees were not techies, but specialists of sales, marketing, etc.

While the tech giants get rid of their staff, smaller companies can benefit from the cuts. Hiring startups now have access to a wide range of talent with experience at Meta, Google, and Microsoft. Therefore, this is a great chance for them to hunt such skilled programmers that they could only dream of before.

Do not miss the opportunity to assemble a stellar team for your business. Contact us at PerceptionBox to learn more.


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