Do layoffs pay off? Meta, Amazon, other tech stocks paint a mixed picture.
- – 02/27/2023
Some technology companies have seen their stocks jump after announcing mass layoffs this earnings season. Others not so much.
Barron’s has taken a look at a sample of leading tech companies and the correlation between layoffs and stock moves.
Here’s what the data show.
Stocks did typically get a positive boost in the trading session immediately after layoff announcements—with an average gain of just over 5% from a sample of 12 prominent tech companies that said they plan to cut at least 500 jobs in recent months. But the cuts haven’t guaranteed lasting gains.
It’s a ‘Refinement’
The largest cuts by number of workers weren’t necessarily the deepest. Amazon (
Some companies found bigger layoffs got a more positive reaction from shareholders. Coinbase was rewarded with a gain of nearly 13% immediately after its layoff announcement in early January. Online furniture retailer Wayfair (
On the other hand, deeper cuts didn’t guarantee a bigger rise. Twilio (
Some layoffs fail to spark any share rise at all. Microsoft (
A more important question for investors might be whether layoffs lead to lasting gains.
Facebook-owner Meta Platforms (
However, Wayfair shows how quickly the initial positivity can dissipate. The stock gave up almost all of its post-layoff gains after reporting a wider fourth-quarter loss than analysts had expected on Thursday. That suggests layoffs only go so far toward convincing shareholders that loss-making companies are changing their ways.
That’s particularly true with tech stocks still vulnerable to expectations over inflation and interest-rate expectations. The tech-heavy Nasdaq Composite Index (
Companies that have implemented layoffs could find themselves under pressure to do more. Google-parent Alphabet (