Tech Companies Pressing Pause on Growth

Tech Companies Pressing Pause on Growth
Amazon Sign at Corporate Building | Image by Shutterstock

Layoffs and cutbacks continue to plague the tech sector with last week’s announcement that Amazon, the country’s second-largest company by revenue, would pause corporate hiring. Layoff announcements at Twitter, Lyft, and others, echoed the e-commerce giant’s news.

Last month, U.S. markets saw 33,843 job cuts, with 9,587 of those in the tech sector. So far this year, the tech industry has cut 28,207 jobs, up 162% from the same time period last year.

According to Amazon, executive leadership has frozen incremental hiring while the economy remains “in an uncertain place.” The decision follows last month’s pause in its retail business, which is in place until the end of 2022.

In a note posted internally and on the company’s blog, Beth Galetti, the Amazon executive in charge of human resources, said the company plans to keep the latest freeze “in place for the next few months” as they “continue to monitor what we’re seeing in the economy and the business.”

Companies in the tech sector have enjoyed surging valuations over the past 10 years, even helping buoy the broader market during the pandemic. The latest earnings season, however, saw the sector announcing likely slowdowns related to elevated inflation and the Fed’s efforts to suppress it via interest rate hikes.

While more prominent players like Amazon and Meta have slowed growth in recent months, relatively more minor tech companies have been announcing outright layoffs.

On Thursday, the ride-hailing service, Lyft, announced that 13% of its workforce, roughly 650 people, would be laid off. Payment processing platform Stripe also intends to reduce headcount, dropping 1,100 positions, or 14% of all employees.

For its part, Amazon anticipates that its current quarter may end up being its slowest in 20 years.

In a recent internal email, Lyft co-founders Logan Green and John Zimmer told employees their decision to proceed with layoffs was driven by their belief of “a probable recession sometime in the next year.” According to the co-founders, “It was important to take these proactive actions to ensure we can accelerate execution, stay focused on the best opportunities to drive profitable growth, and deliver strong business results.”

Lyft also announced plans to offload its first-party vehicle service business. Reportedly, the acquiring company is expected to offer existing employees team roles at the new organization.

Perhaps one of the more high-profile layoffs is Twitter’s headcount reduction. After the highly publicized private takeover by Elon Musk, the company announced a sizeable reduction in positions. Nearly half of Twitter’s 7,500-person workforce was reportedly let go.

Since Musk took over, the company has reportedly witnessed several brands pull advertisements, leading to a “massive drop in revenue,” according to the Tesla CEO.

Stripe co-founder and chief executive Patrick Collison admitted his company’s headcount grew too aggressively during the pandemic. The company is now facing severe economic headwinds, forcing it to slim down.

According to Collison, the Ireland-based payment processor was “too optimistic about the internet economy’s near-term growth” and “underestimated both the likelihood and impact of a broader slowdown.”

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