Tech’s biggest companies discover austerity, to the relief of investors

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SAN FRANCISCO — For much of last year, tech companies stumbled. Digital ad sales plunged. E-commerce sputtered. IPhone production stalled. And investors lost faith.

It was the worst year that the tech industry had experienced on Wall Street since the financial crisis of 2008. Apple, Amazon, Alphabet, Microsoft and Meta lost a combined $3.9 trillion in market value.

Now chastened, many tech companies have begun the year by championing a new and unfamiliar business strategy: austerity.

In recent months, several companies have said they are looking for ways to cut costs and eliminate futuristic projects that have become money pits. Amazon, Alphabet, Microsoft and Meta have each announced plans to lay off more than 10,000 workers.

It is an abrupt turn for an industry that became famous for its big salaries, extravagant offices and lavish perks, from free shuttle buses to free laundry services for employees. But as a boom that lasted 15 years comes to an end, shrinking profits are making tech executives rethink what they believed were important tools in an industrywide competition to hoard tech talent.

On Thursday, Sundar Pichai, CEO of Alphabet, Google’s parent company, said it was “committed to investing responsibly, with great discipline.” Tim Cook, Apple’s CEO, assured investors that the company would be “thoughtful and deliberate.” And Andy Jassy, Amazon’s CEO, made his first appearance on a call with analysts since taking over from Jeff Bezos about 18 months ago and underscored how hard the company had worked to corral what looked like runaway costs.

Their message built on the tone that Meta CEO Mark Zuckerberg set for the industry Wednesday when he called 2023 “the year of efficiency.” During a call with analysts, in which “efficiency” was said more than 30 times, Zuckerberg talked about spending less on infrastructure, removing layers of management and killing dead-end projects.

Investors are cheering tech’s new faith in financial discipline. Shares of Meta, the owner of Facebook, Instagram and WhatsApp, jumped more than 23% Thursday, its biggest daily gain in nearly a decade. Amazon, Alphabet, Microsoft and Apple all rallied, and the tech-heavy Nasdaq rose 3%.

“People wanted to get back in, and they wanted to figure out when the water is safe to wade into,” said Mark Mahaney, an analyst at Evercore ISI, an investment firm. He added that the Federal Reserve’s decision Wednesday to increase interest rates by a modest quarter-point helped tech companies as well, because it suggested that the central bank was getting inflation under control.

“You don’t need much good news for the stocks to outperform,” Mahaney said.

But shares of several of those companies dropped in after-hours trading Thursday evening after they reported disappointing results for the most recent quarter, making it clear that tech’s business challenges remain.

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