Last year, the tech giant made massive cuts to its workforce, which not only pleased investors but led to soaring profits. For example, Meta’s net income in the last three months of 2023 soared 201% from his $4.65 billion to his $14.02 billion.
Big tech companies overhire just because they can.
From 2020 to 2022, Meta hired more people than any other company in its industry. Software companies are highly profitable, with gross profit margins typically in the 70% to 80% range in the industry, said Gil Luria, senior software analyst at financial services firm DA Davidson.
High-tech companies are driven by the desire to hire more people to drive new products, and when they need to cut costs, they can cut headcount without affecting the product in any way, he said. added.
Following a decline in profits in 2022, Meta CEO Mark Zuckerberg predicted that 2023 would beyear of efficiency” and delivered pink slips to tens of thousands of workers. “Their product is so inherently profitable that it doesn’t require a lot of people to actually drive it,” Luria says. “And that’s what a lot of these companies are realizing now.”
Tech companies reinvest labor costs into AI initiatives
Currently, Metas and Microsoft companies around the world are using the money they made by laying off employees to invest in AI initiatives. Buying up a lot of GPUs from Nvidia Build the infrastructure needed for your generative AI products.
Some of the headcount reductions may also be related to certain functions being no longer needed. For example, language learning software company Duolingo Reduced 10% of contractor workforce Advocate for generative AI to create more content.
However, there are some bright spots. On a conference call with analysts and investors, the tech giant also said it was hiring talent to support its AI priorities.
Mature but rapidly growing
The natural cycle of business is that as companies grow, growth slows and small businesses emerge to replace them. But this time it’s different. Mature tech giants are some of the fastest growing companies, Luria said. Founded in 1975, Microsoft has been around for more than just a short time. largest market capitalization It is one of the top publicly traded companies and a leader in the generative AI industry.
On a conference call with analysts and investors yesterday, Meta CEO Mark Zuckerberg said: slim company – No more Free laundry service benefits For technology workers! — Helps you run your meta better and faster. Zuckerberg is betting he can still be ambitious with his plans for generative AI and the Metaverse.