Big Tech has been among the hardest hit sectors in the bear market, and Apple is the latest company to wave the caution flag. The iPhone maker plans to slow the pace of its hiring and spending in 2023, joining the likes of industry peers Amazon and Microsoft amid what may be a coming economic recession, Bloomberg reported.
Bokeh Capital Partners CIO Kim Forest is quoted by Reuters as saying, “Apple’s move reflects a broader slowdown in investing in new things, new companies, and new products. It signifies that inflation is an issue for these companies.”
In June, the inflation rate reached 9.1% versus year-ago levels as consumer prices soared. Apple’s strategy is to curtail spending and hiring in certain divisions rather than reining in spending at the whole company.
This spending slowdown is a marked change for the company, considering it has a history of growing its headcount yearly over the past decade, as the below chart shows.
Despite maintaining its status as the world’s leading smartphone maker, Apple suffered a 9% decline in iPhone shipments in Q2. Morgan Stanley analysts have warned that Apple will likely miss earnings estimates when it reports its quarterly results on July 28, attributing the variance to Apple being weighed down by Mac and the services sector.
Apple shares initially fell after word of its planned hiring and spending surfaced, declining 2% to start the week. Since then, shares have bounced back and recovered those early losses. It looks as though investors are beginning to flock to technology stocks as they place a bet that the worst is over for risk assets. Strategists suggest that the summer buying in the stock market will continue.
Tech Hiring Slowdown
Similar to Apple, search giant Google also has a habit of adding thousands of employees each year, but it, too, has applied the brakes, deciding to limit its new hires to “critical roles” within the organization.
While most tech leaders have refrained from implementing a round of layoffs, Microsoft is the exception. It is cutting 1% of its workforce, or close to 2,000 jobs, as it undergoes a reorganization.
Netflix has also been shrinking its staff, laying off approximately 300 employees in June. Mark Zuckerberg’s Meta Platforms Inc., parent company of Facebook, is also feeling the pinch, having reduced its spending budget by $3 billion in 2022 and terminated senior-level jobs.
As for Apple, its full-time staff hovers at around 154,000. The company traditionally unveils the latest version of its iPhone and other devices in September as it gears up for the holiday shopping season. Even if staff reductions somehow affect this pattern in 2022, Apple still plans “an aggressive product launch schedule in 2023 that includes a mixed-reality headset, its first major new category since 2015.”