News from the Financial Associated Press on January 31 (edited by Zhou Ziyi)Big U.S. technology companies still look “bloated” after the latest wave of layoffs, according to Bank of America strategists.
Beginning in the second half of last year, some large technology companies began to gradually freeze recruitment and lay off employees in order to cut costs. The wave even spread to Wall Street banks.
Alphabet, the parent company of Google, announced this month that it will lay off 12,000 employees worldwide; Microsoft also announced that in response to slowing revenue growth, the company will lay off 10,000 employees by March 31; Large-scale layoffs will affect more than 18,000 employees; in November last year, Meta, the parent company of Facebook, announced the layoff of 11,000 employees.
Strategists such as Bank of America’s Savita Subramanian studied the tech companies’ headcounts versus revenue over the past three years and concluded,Even after layoffs, some firms are still 20% larger。
Subramanian believes that the US technology industry will face more serious margin pressure in the future due to the prospect of economic recession.
“Sales have historically been the main driver of gross margins, while weaker demand and negative operating leverage imply more pressure on margins going forward,” BofA strategists wrote in a research note. “
Because of the magnification effect of leverage, companies often use leverage to expand their scale and profits during their operations. However, leverage is a double-edged sword that can multiply both gains and losses. The so-called negative operating leverage refers to the double decline in gross profit and profit brought about by the decline in sales.
Tech companies have been slashing costs to boost profits after the coronavirus pandemic led to a strong rally in the tech sector, but demand has started to fade as restrictions have been gradually eased.
Since 2022, layoffs in the US technology industry have caused more than 100,000 people to lose their jobs.