Investors are reaping the rewards of job cuts and cost-saving measures at Meta and Amazon, as both companies posted earnings that exceeded expectations on Thursday. The surge in their stock prices affirms the success of the belt-tightening strategies that have characterized the tech industry over the past 16 months.
Throughout 2023, Meta Platforms Inc. and Amazon.com Inc. implemented cost-cutting measures and redirected their business focus. While this strategy disrupted the lives of displaced tech workers in Seattle and Silicon Valley, it seems to have yielded substantial benefits for investors. The positive outcome was evident as both companies reported earnings that exceeded expectations on Thursday, leading to a significant surge in their stock prices. This success underscores the effectiveness of the belt-tightening strategies that shaped the tech industry over the past 16 months.
In 2023, Meta, having reduced its workforce by 22%, disclosed intentions for a $50 billion stock buyback and introduced its inaugural quarterly dividend. This move signals to investors that the company has surplus funds and provides them with an incentive to remain invested. On the other hand, when Amazon investors inquired about potential plans for returning capital to shareholders, executives remained noncommittal. Amazon had initiated its largest-ever round of corporate job cuts in 2022, affecting around 35,000 individuals last year. In 2024, the company has already announced further job eliminations in its Prime Video, studios, and Twitch livestreaming businesses.
Investors expressed satisfaction seeing tech companies, which often indulge in ambitious projects with uncertain returns, refocus their investments on lucrative business lines, as noted by Gil Luria, Managing Director at D.A. Davidson & Co.
“The recently acquired cost discipline is proving beneficial for investors, allowing these companies to trim less productive ventures while redirecting some of the savings into the more rapidly expanding segments of their business,” he stated. “Simultaneously, these companies have successfully accelerated revenue growth, leading to a substantial increase in margins.”
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