As with so many things in investing, the devil is in the details. For instance, the narrative around Facebook parent Meta has been a bit negative for the last year or two, thanks to strategic missteps, and Wall Street clearly thinks its recent restructuring is a way to get things back on track – and the recent earnings numbers seem to back that up. The same can be said for companies that embarked on cost-cutting efforts several months ago.
However, it's impossible for more recent layoffs – particularly those in January – to be reflected in any new profit reports or corporate structure. That's particularly true in the case of Microsoft and its roughly $68.7 billion acquisition of Activision Blizzard that was only recently finalized in October.
Time will tell whether these moves are indeed good for the long-term health of a company, or stopgap solutions that are penny-wise but pound-foolish. That means investors must look beyond the current round of tech sector earnings to see if year-over-year comparisons continue to improve, or if the savings from tech layoffs have been reinvested in other efforts to drive shareholder value.
It's also important to see how the Silicon Valley workforce responds. There's nothing wrong with a company taking stock of its operations and right-sizing head count based on a long-term strategy, but tech companies run a real risk of undercutting morale or losing top talent if they are seen to prioritize profits over people.
https://money.usnews.com/investing/articles/2024-layoffs-how-they-affect-stock-prices