Dive Brief:

• Further job cuts are expected in the technology sector as a growing number of industry CFOs and other C-suite executives prioritize profitability over growth, according to a survey by AlixPartners, a consulting firm.

• The survey found that many executives are relying on headcount reduction as a tool to boost their profitability, with nearly half (46%) of those whose companies have already trimmed their workforce by more than 5% planning future job cuts over the next 12 months.

• “Unfortunately, we expect more pain to come for the tech industry,” Giuseppe Gasparro, a partner and managing director at the firm, said in a press release.

Dive Insight:

Tech companies collectively shed more than 390,000 jobs from the beginning of 2022 through the end of last month, according to Layoffs.fyi, a website that tracks such data. The players with the biggest layoffs include Google, Meta, Microsoft, Amazon and Salesforce.

Factors such as high interest rates, slowing customer demand and over-hiring during the COVID-19 pandemic have combined into a “perfect storm” that is now forcing technology-industry executives to adopt a more structured, long-term approach to ensuring profitability, according to the AlixPartners report.

“Unfortunately, we fear this storm isn’t over yet,” the report said. “The macro environment hasn’t turned and likely won’t for some time. Interest rates continue to pressure valuations and limit access to capital.”

Nearly three out of four (74%) of respondents said they plan to focus on profitability over or equal to growth over the next 24 months, up from 56% who said this was their priority over the last two years, the study found. 

Besides layoffs, big tech companies are betting heavily on artificial intelligence investments to grow their profit margins. The topic has dominated earnings calls in recent months, as previously reported by CFO Dive.

However, AlixPartners warned that neither layoffs nor AI will be sufficient to ensure long-term profitability. Companies should instead adopt a “transformational operational change,” the consulting firm said.

“Building focused and structured collaboration among all key facets of your business is critical during leaner times,” it said. 

AlixPartners conducted an online survey in May of 146 C-suite executives, including CEOs, CFOs, and chief operating officers, in the tech industry.