Twitter launched a massive round of layoffs on Friday, just about a week after Elon Musk acquired the company. While the situation at Twitter is extreme — close to half of the workforce could reportedly be let go — it’s not the only tech business announcing layoffs.
After strong years for the sector in 2020 and 2021, many tech companies have struggled in 2022 as consumer spending has shifted at the same time the Federal Reserve has been hiking interest rates. The tech-heavy Nasdaq stock index is down more than 33% this year, compared to a decline of "only" about 22% for the S&P 500, and recent earnings reports from tech giants have been grim.
At Twitter, Musk says he’s slashing the size of the workforce because the company is too bloated with employees. Other layoffs in tech have more to do with the difficult economic outlook as the Fed presses on with raising interest rates to try to control inflation that remains very high. The economy is not officially in a recession, but some economists forecast that we're likely to enter one sometime in the next year.
Rising interest rates affect growth companies that are borrowing money as they try to scale because the cost of getting loans increases. This is a problem that applies to lots of tech companies.
Twitter, tech companies and layoffs
Some companies have opted for hiring freezes instead of layoffs. When employee turnover is as high it's been in the U.S. recently, a freeze on hiring new people to backfill open positions can be a quick way for companies to reduce employee numbers and labor costs, and it's a less drastic measure than layoffs.
It's very unusual for so many companies to announce these measures at the same time, especially for an industry that's been accustomed to booming growth for much of the past decade.
Beyond Twitter, here are some of the big tech companies that have announced layoffs and hiring freezes recently:
In an earnings call at the end of last month, executives at the Facebook parent company said they plan to keep their headcount roughly the same through the end of 2023.
"We are holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities," CFO David Wehner said.
Lyft's cofounders announced in a memo on Thursday that the company is laying off 13% of its employees.
Their letter cited "the realities of inflation and a slowing economy." Lyft's layoffs affect all parts of the company, and they come after the implementation of other cost-cutting measures earlier in the year including a hiring freeze and spending cuts.
Amazon is pausing hiring for its corporate business, a company executive said in a Wednesday message to employees. The company had already recently paused hiring in some of its other business units.
Amazon said the move is a response to the broader economic environment. The measure will remain in place for at least a few months, according to the message to employees, but Amazon will hire replacements for most positions that employees vacate.
CEO of the payments service provider Patrick Collison told Stripe's staff on Thursday that about 14% of the company would be laid off.
In a memo, Collison said Stripe grew at a fast rate during the pandemic as e-commerce dominated, but now the landscape is shifting, forcing the company to scale back.
"We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets and sparser startup funding," he said.
The parent company of Snapchat announced a significant restructuring back in August involving layoffs of 20% of its workforce.
CEO Evan Spiegel said Snap was experiencing a decline in ad sales, prompting the cuts.