Yet I note that this scenario seems to be breaking down, at least for certain large technology companies: firms in excellent financial health are also announcing significant cuts. How can we explain that companies posting record profits are carrying out large waves of layoffs?
In recent months, some technology giants have set the tone. Meta Platforms recently announced 8,000 upcoming layoffs, representing nearly 10% of its workforce. Microsoft, for its part, announced a voluntary departure plan representing nearly 7% of its workforce. According to a recent article in The Wall Street Journal, 45,800 layoffs were announced in the technology sector in March (source: Layoffs.fyi).
However, companies such as Meta and Microsoft are far from experiencing financial difficulties. In 2025, Meta’s adjusted earnings per share recorded growth of 24.4% compared with 2024. As for Microsoft, for the 12 months ended December 31, 2025, earnings per share were up 23.8% year over year.
If Meta or Microsoft significantly reduce their workforce, one may wonder what companies with less impressive profitability will do.
One of the reasons cited for these layoffs is the scale of investments made by these companies—and many others in the sector—in AI, notably in data centers. Perhaps these layoffs reflect management’s confidence in AI’s ability to increase efficiency. Or do they also reflect a desire to cut costs to continue these massive AI investments? One could thus replace salaries with massive investments in costly AI microprocessors.
I wonder, however, whether such layoffs do not stem from a short-term vision. They probably increase profits in the coming quarters, but what will be the medium-term impact on these companies’ profitability?
Indeed, over a longer horizon, such layoffs are likely to produce very real secondary effects:
An erosion of loyalty and trust among remaining employees;
A loss of organizational knowledge and operational continuity;
A weakening of internal culture;
A gradual disengagement, at the very moment when the company expects greater productivity.
The WSJ article highlights this well: “For all of AI’s capabilities, people will be needed to figure out business models, deal with customers and, importantly, make sure AI tools are being deployed and used safely.”
Ultimately, AI will no doubt allow companies to be more efficient—that is, to do more with fewer resources—and to become more profitable. I nevertheless believe that the significant layoffs announced recently by several large technology companies are premature. They seem, in a way, driven by the need to generate margins to finance the massive investments they are making in AI.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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