Tech giants don’t bring good news for investors.
As markets look for reassuring news on the health of the economy, Silicon Valley is delivering very bad news.
Red signals have been sent out by Alphabet for the past few weeks (Google) Microsoft (MSFT) and metaplatforms (META) .
Last month, Alphabet CEO Sundar Pichai warned of the “toughest macroeconomic conditions” in 10 years.
“Listen, I hope you’re all reading the news externally,” Pichai told employees during an all-hands meeting held in New York this week. “The fact that we’re acting a little more responsibly in one of the most challenging macroeconomic conditions of the past decade means I think it’s important that we pull together as a company to weather such moments.”
Pichai tried to justify why the company took drastic cost-cutting measures while profits remained strong. Google just canceled the next version of its Pixelbook laptop and disbanded the team responsible for building it.
The company has also made cuts at its tech incubator Area 120, which aimed to keep some of the company’s talent in-house, according to Siliconangle.com. Basically, Google is cutting funding and eliminating about half of the unit’s current projects and teams.
Alphabet has also cut several perks, travel and entertainment budgets.
Also in September, Facebook CEO Mark Zuckerberg told employees the company is entering a new era of lackluster growth.
Meta Platforms, the parent company of Facebook, Instagram and WhatsApp, would be downsized for the first time since 2004.
This includes several measures: the company will freeze hiring, restructure some teams, and cut budgets even for teams in growth industries. For example, Meta shouldn’t replace departures and part ways with people “who aren’t succeeding,” Zuckerberg told employees.
“I had hoped that the economy would now stabilize more clearly,” said the CEO. “But from what we’re seeing it doesn’t seem like it yet, so we want to plan a bit conservatively.”
The boss added that Meta will be “a little smaller” by the end of 2023.
The Meta and Alphabet moves show a slowdown in the economy as economists fear the Federal Reserve’s aggressive rate hike to quell inflation could trigger a recession.
Amazon freezes the setting
Amazon (AMZN) appears to be following in the footsteps of Alphabet and Meta. The e-commerce giant will freeze hiring of businesses in its retail division, which includes online and physical stores, its third-party marketplace and Amazon Prime, its subscription service.
The group, founded by Jeff Bezos, has asked recruiters to withdraw all current job offers in this area in the coming days, the New York Times reports, citing an internal memo. The company also asked them to halt recruitment activities planned for the next few months.
According to the New York Times, there were more than 10,000 job openings in the branch department at the time the freeze was announced.
However, Amazon does not want to talk about a hiring freeze. The company says new positions will become available in 2023. The hiring freeze is expected to last at least until the end of 2022.
The freeze will not affect Amazon Web Services, the company’s cloud computing division, or warehouse workers.
Amazon did not respond to TheStreet’s request for comment.
But Brad Glasser, a spokesman, issued a statement to multiple media outlets.
“Amazon continues to have a significant number of job openings across the organization,” Glasser said. “We have many different companies at different stages of development, and we expect to adjust our hiring strategies at each of those companies at different points in time.”
Amazon’s retail arm, which underwent a leadership change last summer, had grown strongly during the Covid-19 pandemic and benefited from consumers avoiding physical stores.
In order to meet the increasing demand, Amazon had also hired a lot of staff, which almost doubled the workforce in two years.
But since reopening, the growth of the retail business has slowed. Faced with this new reality, CEO Andy Jassy told investors the company will focus on cutting costs and being efficient.
In recent months, the group has closed or canceled the launch of new websites. The Seattle-based company has also closed almost all of its US call centers, according to Bloomberg.
“I want to note that we’re still up 188,000 year-over-year and have nearly double the headcount of early 2020 as we head into the pandemic,” Chief Financial Officer Brian Olsavsky told analysts during the company’s second-quarter earnings call . “There will be adjustments to this as we move towards greater holiday-level demand.