Microsoft, which laid off 10,000 workers in January, is betting big on AI. Christophe Morin/IP3/Getty Images
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- The technology’s “year of efficiency” shows the first signs of work.
- Microsoft, Google and Meta saw their shares rise after reporting better-than-expected results.
- This comes after companies have made significant downsizing, including massive layoffs and a focus on AI.
This is fake work and artificial intelligence.
Recent cost-cutting in the tech sector, from canceling free breakfasts and lunches to cutting thousands of jobs, isn’t just about surviving short-term hardships. It’s about the current crop of tech executives showing investors that they can continue to succeed in the future.
And early signs are that the strategy is succeeding.
On Tuesday, Alphabet, the parent of Microsoft and Google, two companies that have cut 22,000 jobs in recent months and also abandoned artificial intelligence, reported first-quarter results that reassured investors.
The Redmond giant announced that revenue rose 7% to $52.9 billion in the three months to March. The respective cloud businesses were the main drivers of revenue growth, despite layoffs from both of these divisions.
The meta has also started to see some gains from recent efforts to rein in costs and bets on AI. The company beat analysts’ expectations for a recession, with revenue up 3% for the year to $28.6 billion.
The positive results come after tech companies declared 2023 the year of efficiency.
At Davos this year, Microsoft CEO Satya Nadella said the company “will have to do more with less,” and Alphabet’s Sundar Pichai made similar remarks.
“Sometimes there are areas where progress is needed [where] there are three people making decisions, understanding that and reducing it to two or one increases efficiency by 20 percent,” Pichai told CNBC last summer.
Mark Zuckerberg talked about making the Meta “leaner” and “flatter.”
The job destruction has been brutal, and affected workers can rightly blame the CEOs who are now destroying them.
Insider analysis has shown that many of the most aggressive tech professionals have expanded rapidly during the pandemic at the cost of efficiency. Critics were able to avoid much of the drama of layoffs because companies overhired workers who ended up doing “fake work.”
The layoffs coincide with AI’s transformation
The drop in efficiency has been compounded by the sudden explosion of generative AI tools like ChatGPT from research startup OpenAI. The latter proved that a small, nimble and risk-taking team can still outperform the tech giants.
Accordingly, the tech giants moved quickly.
Microsoft laid off 10,000 workers in January. It also established early leadership in AI by partnering with OpenAI and implementing GPT-4 into its Bing search engine, in what Satya Nadella described as “a new era of computing.”
At Microsoft’s earnings call on Tuesday, he told investors he believed generative artificial intelligence gave them a “differentiated game” to pursue new opportunities. “We feel we have a good advantage and we have different offers up and down,” he said.
Earlier this year, Google cut 12,000 jobs to focus on its advertising business and push to introduce rival AI technology into its main search engine.
Both companies will be reassured by the fact that despite the significant reduction in workforce, benefits and innovation can still emerge. While consolidating their places in the AI wars, they can be saved for years to come.
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