The cryptocurrency exchange platform Coinbase announced in June it would lay off about 18% of its workforce, citing an approaching recession. Tesla on 3 June informed workers it plans to lay off 10% of its workforce, and on Tuesday said it would close its San Mateo office and cut 229 jobs there.
“If I had to bet, I’d say that this might be one of the worst downturns that we’ve seen in recent history,” Meta CEO Mark Zuckerberg told employees during a weekly Q&A session that was recorded and heard by Reuters. Meta plans to slash hiring plans for engineers by at least 30%, according to Reuters.
Investors will be keeping a close eye on Meta’s earnings, which will be reported on 27 July, to see if there has been any meaningful recovery from the company’s disastrous reports of late 2021 and early 2022. The company lost a record $230bn in market value amid a rebrand and shake-ups to its business model.
Meta announced in 2021 a shift in its business from social media to artificial and virtual reality. Zuckerberg also previously warned that Apple’s new privacy rules would have a negative impact on the company’s advertising revenue.
“Meta is in a period of transition right now as a company,” said Mike Proulx, a researcher at the market advisory firm Forrester. He added the company is also struggling to retain users, particularly younger demographics, as they migrate in large numbers to competitors like TikTok.
“Meta has a Gen Z problem, so the company needs to drive usage of new products like Reels and find a way to monetize it,” he said. “That is a long term play.”
Large companies are not the only members of the tech sector to be hit, with layoff tracking site Layoffs.fyi showing 36,861 new employees laid off in the second quarter of 2022, compared with just 2,695 employees laid off in the same quarter of 2021.
However, analysts have cautioned that the current slump represents a slowdown from runaway growth in previous years, and not necessarily a crash.
In the unfolding of the global Covid-19 pandemic, tech companies like Peloton, Zoom and Netflix saw meteoric growth as more people relied on technology to work and live online.
That growth is abruptly coming to a close: Netflix, which added more than 36 million subscribers during the first year of the pandemic, lost more than half its value since reporting disappointing results on 19 April and said in May it would cut about 150 jobs.
“The streaming space is finding that there is more consumer choice than ever, and consumers will follow where the best content is,” Proulx said. “As more and more subscription services emerge, something has got to give.”
Not all members of the tech sector have been equally affected by the downturn, said Anwar. While Meta, Netflix and others struggle, companies like Microsoft and Apple are more stable.
“That said, no tech company is immune from pressures coming from rising interest rates, slowing economic growth and soaring inflation,” he said. “Their earnings will show some impact of these economic headwinds.”
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