Salesforce Inc CRM is implementing layoffs of close to 700 employees, about 1% of its 70,000-strong workforce, following a previous reduction of 10% or around 8,000 workers in 2023.
This move comes amid ongoing cost-cutting pressures from investors, including activist shareholders like Elliott Management, to drive its margins.
Despite these cuts, Salesforce still maintains 1,000 open positions, suggesting these layoffs are part of workforce adjustments rather than a significant strategic shift, the Wall Street Journal reports.
The company’s focus is on directing spending towards growth.
Last September, Salesforce also shared plans to hire nearly 3,300 new employees across various departments, focusing significantly on sales, engineering, and developing the company’s data cloud product.
These steps have contributed to a significant boost in its stock value, which increased by almost 80% over the last 12 months, outperforming the Nasdaq Composite Index’s 37% rise.
Tech firms increasingly focus on artificial intelligence (AI), leading to a hiring surge in this area while other sectors face layoffs into 2024. Over 20,000 tech workers have been laid off so far in 2024, as reported by layoffs.
In January 2023, Alphabet Inc GOOG GOOGL Google divulged plans to eliminate 12,000 positions, comprising 6% of its global employees.
According to Dan Ives of Wedbush Securities, while companies like Alphabet Inc GOOG GOOGL Google heavily invest in AI, they are cutting back in non-strategic areas, CNBC reports.
Google CEO Sundar Pichai has informed employees of more impending job cuts as the company shifts its investments towards AI.
Alex Kantrowitz of Big Technology notes that in the current economic climate, Big Tech companies need to find cost-cutting measures to invest in the expensive AI sector, a trend other major tech firms are likely to follow.
In 2023, the tech sector let go of 141,516 employees in the first half of the year compared with about 6,000 a year ago.
German software company SAP SE SAP announced the restructuring of about 8,000 roles to focus more on AI.
It plans to manage this through voluntary leave and internal re-skilling, expecting to maintain its headcount by year-end. Amazon.Com Inc AMZN, another major investor in AI, has laid off workers in its video-streaming, studio, Twitch, and Audible divisions.
Simultaneously, Amazon Web Services is planning a significant investment in Japan to expand the cloud computing infrastructure crucial for AI.
This shift reflects a broader change in corporate strategy in response to global economic challenges like high interest and inflation rates, leading to cautious consumer spending.
Price Action: CRM shares closed higher by 0.78% at $279.03 on Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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