Amazon is the latest tech titan moving to aggressively shrink its workforce: Facebook, Twitter, Salesforce and others have announced significant layoffs this year — a jarring turnaround for an industry that had taken on an aura of invincibility after a decade of explosive growth.
The exact number of layoffs has not been set, the person said, though they are likely to hit its devices, retail and human-resources teams.
Amazon declined to discuss the Times report. Its founder and executive chair Jeff Bezos owns The Washington Post.
If the e-commerce giant follows through on the plans, first reported Monday by the New York Times, it would be the biggest job cuts of its history. Amazon announced a broad hiring freeze among its white-collar workforce earlier this month, a move it expected to last at least “the next few months.”
After years of staggering growth, the tech sector — a favorite with investors — is on wobbly ground. The recent spate of layoffs follows months of warning signs, including tech start-ups finding it more difficult to raise capital.
“The clock has struck midnight on hypergrowth for big tech,” said Dan Ives, a financial analyst with Wedbush Securities, adding that the significant job cuts at some of the tech sector’s largest companies means “a recession is on the doorstep.” Some economists have been warning about a potential recession for months.
Amazon in particular has been in expansion mode for most of its history, from launching its Prime memberships to pioneering cloud computing to buying upscale grocery chain Whole Foods. The company, which brought in $469.8 billion in sales last year, also said it would buy health-care chain One Medical for $3.9 billion this summer.
But under CEO Andy Jassy, who took over from Bezos last year, the company has pared back many of its newer initiatives — including some of its brick-and-mortar store experiments, as well as its primary health care offering Amazon Care. Amazon shut down its physical bookstores earlier this year, as well as a chain of 4-star stores.
The planned job cuts also represent a remarkable turnabout for Amazon, which has hungrily hired tens of thousands of employees in both its warehouses and corporate offices in the past decade. The company had more than 1.5 million employees at the end of September, a 5 percent increase from the year before.
Amazon has more than 330,000 corporate and tech employees around the world — meaning the expected 10,000 layoffs account for about 3 percent of the company’s white-collar workforce.
Amazon’s business soared during the pandemic as people spent more time at home and increasingly shopped online. But in May, the company acknowledged it had hired too quickly in its warehouses to keep up with the pandemic surge, which was waning by then. (Broad layoffs in its warehouses are unlikely because they typically experience more than 100 percent turnover in a given year, partly because of the strenuous working conditions, experts say, and attrition is high.)
High inflation and increasingly budget-conscious consumers caused the company to report a disappointing forecast for the upcoming holiday season — typically Amazon’s strongest time of the year — sending its stock plummeting last month. Amazon’s stock has fallen more than 39 percent since the beginning of the year, but the company is still worth more than $1 trillion.
“We are seeing signs all around that people’s budgets are tight, inflation is still high,” Amazon Chief Financial Officer Brian Olsavsky said during a call about the company’s third-quarter earnings. “We are preparing for what could be a slower growth period, like most companies.”
Amazon executives in recent weeks acknowledged during meetings with rank-and-file staff that the company was preparing for potential hiring freezes and layoffs, according to a person in attendance, who spoke on the condition of anonymity for fear of workplace repercussions.
But in at least one of those meetings, executives sought to reassure employees that not all teams would be cut.
And Amazon’s warehouses continue to hire — the company cannot afford to cut back on its logistics operations while heading into the busiest shopping season of the year. The company said in October that it plans to add 150,000 workers nationwide for the holiday season, and there are no signs it intends to pull back on that number.
Amazon’s upcoming layoffs are a relatively small part of its workforce, but they show that investments are going to be “more closely scrutinized” going forward, said retail analyst Neil Saunders.
“Amazon will remain a powerhouse in retail and beyond,” Saunders said in a statement. “However, it will no longer find growth so easy. Its change of trajectory is a warning for others in retail, but it is also an opportunity for more nimble players to examine how they can take some share.”
Tech layoffs have accelerated rapidly in recent weeks. Meta, the parent company of Facebook and Instagram, cut 13 percent of its workforce — 11,000 jobs — last week. New Twitter CEO Elon Musk cut half his company’s staff shortly after acquiring the social network. Ride-hailing service Lyft let go 13 percent of its workers. Private fintech firm Stripe, real estate marketplace Zillow and crowdfunding platform GoFundMe have all announced layoffs since the start of October.
Apple, seen as Silicon Valley’s most resilient player, has declared a hiring freeze. Google said this summer it would slow its pace of hiring and CEO Sundar Pichai told employees that the company needed to be “working with greater urgency, sharper focus and more hunger than we’ve shown on sunnier days.”
The industry’s job cuts come as tech firms warn of recession risks and race to cut costs after pandemic-era hiring binges. The Federal Reserve’s persistent interest rate hikes — with more to come — have squeezed tech companies that rely on cheap lines of debt, experts say, to finance expensive payrolls and capital-intensive services.
The broad layoffs will have implications for the wider tech-oriented areas like Silicon Valley and Austin, Wedbush’s Ives said.
“It’s going to be an earthquake-like ripple effect across the Silicon Valley ecosystem — from restaurants to real estate,” he said.
He added that tech is a “canary in the coal mine” for broader cuts across the economy that could come in the next year.
Go to Publisher: Technology
Author: Rachel Lerman