Microsoft and Google Bring Bad News for the Economy

Tech giants Microsoft and Google have just taken additional hard decisions ahead of their earnings reports.

The second-quarter corporate-earnings season is in full swing. And Big Tech, wanting to avoid unpleasant surprises, isn’t waiting to tell investors how a sharp economic slowdown could hurt its performance in coming months.

The tech industry also seems to indicate that it is not too optimistic about the state of the economy. 

“We’ll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities,” Google  (GOOGL) – Get Alphabet Inc. Report Chief Executive Sundar Pichai wrote in a memo to employees on July 12.

“For the balance of 2022 and 2023, we’ll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities.” 

Google Pauses Hiring

The CEO added that Google needed to be “more entrepreneurial, working with greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days.

“In some cases, that means consolidating where investments overlap and streamlining processes. In other cases, that means pausing development and redeploying resources to higher priority areas. 

“Making the company more efficient is up to all of us — we’ll be creating more ways for you all to engage and share ideas to help, so stay tuned,” Pichai added.

Only a few days after this memo, Google sent a new and worrying warning: The Mountain View, Calif., search, advertising and cloud company is immediately suspending hiring for two weeks, according to The Information

The company went from slowing hiring for the rest of the year to suspending it, at least temporarily.

“We’ll use this time to review our headcount needs and align on a new set of prioritized staffing requests for the next three months,” Prabhakar Raghavan, a senior vice president at Google, wrote in an internal memo reviewed by The Information.

The hiring pause would not affect offers that had already been made to applicants, but the company won’t make new offers until the pause is over.

Google didn’t immediately respond to a request for comment.

Microsoft Eliminates Open Jobs

Microsoft  (MSFT) – Get Microsoft Corporation Report has decided to eliminate many open jobs, a spokeswoman told TheStreet, confirming information from Bloomberg News

Key divisions like the cloud business, Azure, and the security software unit, which are seen as two key areas of growth for the Redmond, Wash., software giant, are affected by the removal of the job listings.

The company also won’t rescind job offers that have already been made, and it will make exceptions for some critical jobs.

“As Microsoft gets ready for the new fiscal year, it is making sure the right resources are aligned to the right opportunity,” the spokesperson said in an emailed statement. “Microsoft will continue to grow headcount in the year ahead, and we will add additional focus to where those resources go.”

In May, MSFT had decided to adopt a more cautious approach to recruitment, particularly in the Windows, Office and Teams groups. 

Earlier this month, the company cut a small number of jobs as part of a realignment but said it would continue to increase its workforce. The job cuts affected less than 1% of the company’s 181,000 employees, including people working for consulting and customer solutions.

The elimination of open jobs at Azure and in the security division is surprising. Azure competes with Amazon  (AMZN) – Get Inc. Report Web Services, which is leading the race among cloud-infrastructure providers. Azure is trying to narrow the gap with AWS and must, at the same time, counter Google Cloud’s offensive. 

As for the security division, it is in a sector that has seen cyberattacks multiply and become increasingly sophisticated. Microsoft is also in great demand since the Russian war in Ukraine.

It should be remembered, however, that the month of July, in particular July 1, marks the beginning of a new fiscal year for Microsoft. The month is traditionally marked by job cuts and adjustments in workforce, so that staffing is in line with the sectors where the company wants to invest.

Besides Google and Microsoft, Apple  (AAPL) – Get Apple Inc. Report and Meta Platforms  (META) – Get Meta Platforms Inc. Report, parent of Facebook, Instagram and WhatsApp, have also taken steps recently to slow hiring in anticipation of a potential recession.

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