Business

Tech Layoffs Just Keep Coming as Sector

Resets for AI
DocuSign is latest to cut jobs after years of industry spending and growth without
constraint

By Sarah E. Needleman
Feb 06, 2024 05:34 p.m. ET

The drumbeat of job cuts in the tech industry continued on Tuesday when DocuSign became the
latest company to announce layoffs this year, as Silicon Valley keeps a grip on costs while
pouring more cash into artificial intelligence.

Since cutting tens of thousands of workers in late 2022 and early last year, the tech industry has
extended its belt-tightening after years of growth with little restraint. Companies have emerged
from the tech downturn with a new focus on profitability. And the AI excitement that has been a
boon to the tech industry is also leading companies to shift resources away from other efforts
and, in some cases, increase automation in their own workforces.

DocuSign said it would cut about 6% of its workforce, or 400 jobs, as the e-signature company
looks to bring costs down and reverse its struggling stock price. That came a day after Snapchat
parent Snap said it was cutting 10% of its staff to ensure it can invest in growth. On Tuesday,
Snap’s shares, which had risen sharply in recent months, plunged after it reported revenue
growth that lagged below expectations, underlining the ongoing investor pressure on tech
leaders.

Last week, identification-software company Okta said it is laying off 400 employees, or about
7% of its workforce. Zoom, Google, Amazon and others across tech have also moved recently to
cut jobs.

Management experts say the barrage of tech layoffs largely reflects new efforts by companies to
operate leaner and more efficiently. Companies expect new artificial-intelligence tools to help
them achieve those goals, albeit slowly, as they are still trying to determine which jobs those
technologies can replace or minimize.

“The biggest driver is automation,” said Anna A. Tavis, clinical professor of human-capital
management at New York University. Companies are saying to themselves, “let’s rip the Band-
Aid. The sooner we do it, the better,” she said.

The tech sector cut almost 16,000 workers last month, the most since May 2023, according to
outplacement firm Challenger, Gray & Christmas, and was second only to the finance industry
for the period.

Amazon on Tuesday revealed cuts that will affect hundreds of staff in its pharmacy business and
at One Medical, the primary care service it acquired last year. Neil Lindsay, Amazon’s senior
vice president of health services, told workers on Tuesday that the company “identified areas
where we can reposition resources” and would result in a few hundred role eliminations,
according to a memo viewed by The Wall Street Journal.

Amazon in recent months has slashed roles in its entertainment, devices and games divisions,
citing shifting priorities across its businesses that include AI. The company last July laid off
about 80 employees in its pharmacy unit.

Google parent Alphabet, which cut 12,000 jobs last year in its largest-ever layoffs, has been
shedding hundreds of additional staffers across the company in recent weeks as it focuses more
resources on priorities such as AI.

“We have ambitious goals and will be investing in our big priorities this year,” Chief Executive
Sundar Pichai said in a note to employees last month. “The reality is that to create the capacity
for this investment, we have to make tough choices.” He said this year’s cuts won’t be on the
same scale as last year’s, but that they were likely to continue throughout the year.

While some companies are making room to spend more on developing AI itself, others are
seeing the benefits of using AI to replace or aid jobs usually done by humans.

The language-learning software company Duolingo last month said that it cut 10% of its
contractors and that it would use AI to handle some content creation.

Such transitions to AI extend beyond the tech sector. UPS said it would cut 12,000 jobs amid a
shipping slowdown and that those positions weren’t likely to return even when business picks
up. UPS is using machine learning to help it better determine what to charge customers for
shipments and, as a result, the company’s pricing department has needed fewer people.

Pandemic-fueled growth combined with low-interest rates at the time sent companies on a hiring
and expansion spree. Since then, borrowing money has become more expensive.

Workers are also staying in their jobs longer now, which is making layoffs more common. It is
also why some companies are asking workers to come back to the office full time, management
experts say.

After so much hiring and so many wage increases during the pandemic, “workers are getting
whipsawed,” said Rocki-Lee DeWitt, professor of management at the Grossman School of
Business at the University of Vermont.

Companies are also under pressure to meet analysts’ expectations, and layoffs can be a way to
boost a stock price. “That forecast locks you into meeting the expectations,” DeWitt said. “If you
fail or give downward guidance, you get spanked.”

Okta Chief Executive Todd McKinnon, announcing layoffs last week, said the company had
overhired based on growth projections that haven’t panned out. “We need to run the business
with greater efficiency,” he said in a memo to employees.

Riot Games, a unit of China’s Tencent Holdings, said last month it was laying off 11% of its
workforce, or 530 positions globally, because it was trying to do too much. “Our costs have
grown to the point where they’re unsustainable, and we’ve left ourselves with no room for
experimentation or failure—which is vital to a creative company like ours,” Riot said in a memo
to employees posted to its website.

Some layoffs happen because of more-conventional factors such as duplication from a merger or
lost business.

Last month, Microsoft said it was letting go of about 8% of its videogaming staff, or roughly
1,900 employees, mainly in response to its October acquisition of Activision Blizzard. Robotic-
vacuum maker iRobot started a plan to cut 350 job cuts, representing about 31% of the
company’s workforce, after its deal to be acquired by Amazon fell apart.

The online marketplace eBay said it would lay off about 1,000 employees, or 9% of its full-time
workforce, as part of efforts to boost performance amid rising competition and softer consumer
spending.

“Companies anticipate the fact that the economy won’t be necessarily booming,” said Denis
Machuel, chief executive of global staffing firm Adecco Group, which works with large
employers. Though the number of white-collar job cuts at prominent companies might not be as
high as last year, there are still “quite a high level of layoffs coming in,” Machuel said.

The employment outlook for tech workers isn’t all doom and gloom. Demand for their skills
continues to grow outside of tech in areas such as consumer products and manufacturing, said
Tom Wilson, managing director at Gallagher Executive Search in Palo Alto, Calif.

Consider how there is now bluetooth in toothbrushes and GPS in tractors, he said, adding that
demand for human-resources professionals who understand tech recruiting is also rising.

Write to Sarah E. Needleman at Sarah.Needleman@wsj.com