Big tech companies are on hiring sprees, and that won’t end anytime soon—even with costs skyrocketing.
“It’s an arms race right now across tech,” Dan Ives, a managing director and senior equity research analyst at Wedbush Securities, told me. Finding and hiring top talent like engineers has become “incrementally more expensive, both in the Valley, as well as globally,” explains Ives, who covers the technology sector. “When it comes to some of these transformational trends around cloud, metaverse, e-commerce and other product-driven trends, we expect strong hiring trends for tech firms, at least into the middle of 2023.”
For Q1 2022, Amazon reported its first net loss since 2015. On the earnings call on April 29, Amazon CFO Brian Olsavsky talked about what happened with hiring for the quarter. The company may have made too many hires, Olsavsky said. “With the emergence of the Omicron variant in late 2021, we saw a substantial increase in fulfillment network employees that were on leave.” So, the company continued hiring to cover the absences, he said. However, “as the variant subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity,” and $2 billion in extra costs, Olsavsky said.
Though the company says they expect to reduce these “cost headwinds” in Q2, Ives has a different prediction: “They’re gonna spend like 1980s rock stars, at least until 2023,” he says. “Right now, these companies are spending ahead of the growth on the horizon. If they put the brakes on, then they risk losing out in significant markets.”
At Alphabet, Google’s parent company, CFO Ruth Porat said during the Q1 2022 earnings call on April 26 that operating expenses were $18.3 billion, up 24%. Porat also said the headcount growth was the “primary driver of expenses” in research and development, sales and marketing as well as general and administrative expenses. But the company is full speed ahead when it comes to hiring. “The most visible reflection of our focus on long-term performance is our continued investment in talent and compute capacity across the company,” she said.
CEO Sundar Pichai said on the call the company plans to invest “approximately $9.5 billion in our U.S. offices and data centers, creating at least 12,000 new Google jobs in the U.S. in places like New York and Atlanta.”
Meta CFO Dave Wehner discussed hiring during the April 27 earnings call. “We added over 5,800 net new hires in Q1, the majority in technical functions,” he said. “We ended the quarter with over 77,800 full-time employees, up 28% compared to last year.”
However, Wehner indicated a pending change. “Our advertisers are adjusting to a new digital advertising landscape brought about by recent mobile platform changes while navigating a complex set of macroeconomic challenges,” he explained. “Given the resulting revenue headwinds, we have adjusted our plans for hiring and expense growth this year.” (Meta declined to comment further.) Following reports of an impending hiring slowdown, I reached back out to the company. “We regularly re-evaluate our talent pipeline according to our business needs and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly,” according to a company spokesperson. “However, we will continue to grow our workforce to ensure we focus on the long-term impact. In an effort to revise priorities and align hiring targets with current market estimates and pacing, Meta plans to halt or in some cases slow hiring for most mid-to-senior level positions.”
However, in general, Ives predicts tech companies will continue to hire. “Expenses will continue to increase, and the Street won’t like it,” he says. “But right now, they’re between a rock and a hard place because they need to hire. That’s why we think hiring across tech is going to be pretty brisk, at least over the next 12 months.”
As remote work has opened hiring options, Ives says he expects to see more strategic hires geographically, outside of Silicon Valley, in places like Austin and Atlanta. “You can get an engineer significantly cheaper in Austin,” he says.
But in the long run, major tech companies should survive the cost increases. “These companies have more cash than some countries,” Ives says.
*This column has been updated to reflect new details about Meta’s hiring that were confirmed after publication.
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Gallup's report, Inflation Concerns Fueling Low Economic Confidence in the U.S., found that 38% of U.S. adults surveyed rate the current economic conditions as fair, and 42% said poor. Meanwhile, 18% described conditions as good and 2% said excellent. Overall, 76% of Americans said the economy is getting worse. Although economic confidence remains "sharply low," it's still "well above readings during the Great Recession," Gallup found. "However, if inflation continues to rise and gas prices remain elevated heading into the summer months, economic confidence in the U.S. may well fall further," according to the report. The findings are based on a survey of 1,018 U.S. adults, ages 18 and older.
April was a brutal month for stocks. Here are 3 charts that lay out the carnage, and 1 that should give investors hope, a new Fortune report, explores how a "bevy of headwinds are dragging down stocks."About 80% of S&P 500 firms have reported results, and "those results should give investors some reason to worry," Bernhard Warner writes. "Overall, earnings growth is faltering."
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Ammar Rizki was named EVP and CFO at the Obama Foundation. Rizki will start his position in mid-June. He will be responsible for direct oversight of finance, accounting, treasury, and risk. Rizki served as the CFO of Cook County since 2017 having previously served as deputy CFO for almost four years. Prior to joining Cook County, Rizki held a number of managerial and analytic roles in banking and investment management.
“In short, we believe earnings estimates remain too high over the next 12 months even though 1Q results have been better than expected. The issue is that the quality of earnings is deteriorating, and the commentary from management teams is getting incrementally cautious about the future path of growth.”
—Morgan Stanley analysts led by Michael J. Wilson warn investors to expect more downside ahead as earnings growth stalls and inflation persists, Fortune reports.
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