In less than three months, four of the big five US tech companies have cut tens of thousands of employees combined, shattering myths about the industry’s seemingly unstoppable growth in the process.
But there has been one notable exception: Apple.
To date, Apple
(AAPL) has not announced any substantial cuts, thanks in part to slower headcount growth than some of its peers during the pandemic and continued demand for its core products. Some analysts think more modest cost cuts could be coming, however.
The iPhone maker is set to report earnings results for the final three months of 2022 on Thursday after the bell. It is expected to post a rare year-over-year decline in revenue.
While these expectations show the strain Apple’s business is under, Wedbush Securities’ Dan Ives said in a note this week that pent-up demand for upgrading iPhones remains strong. “Apple will likely cut some costs around the edges, but we do not expect mass layoffs from Cupertino this week,” Ives wrote.
Tom Forte, a senior research analyst at DA Davison, agreed there will be staff reductions, but likely not as drastic as those at other large tech companies. “Apple will cut headcount,” he said in a recent interview on Bloomberg TV, but suggested the cuts would come through attrition or reductions at the retail level.
“While they haven’t done so yet, like everyone else, they will adjust their headcount for the current level of demand,” he said.
Fueled by a surge in demand for digital products earlier in the pandemic, Big Tech went on a massive hiring spree.
(AMZN) and Meta each doubled their headcount between the third quarter in 2019 and the third quarter 2022, according to data shared in the companies’ securities filings. Alphabet, meanwhile, grew its headcount 64% during that time, and Microsoft grew its staff by more than 50% over approximately the same period.
Apple, by comparison, grew its headcount by a more modest 20%. As of September 2022, Apple said it had approximately 164,000 full-time employees.
Many tech CEOs, with varying degrees of remorse, have blamed over-hiring in the early days of the pandemic for the mass layoffs now. As pandemic restrictions eased last year, the demand for digital services shifted back toward pre-pandemic levels. Inflation pinched consumer and business spending, and rising interest rates evaporated the easy money tech companies had tapped into. And one-by-one, amid the whiplash, household names in Silicon Valley began announcing widespread layoffs to adjust to the new environment.
While Apple has not announced layoffs, its business has been strained in other ways. Like other Big Tech companies, it has faced threats of antitrust action in the United States and EU. Earlier this month, Apple also said CEO Tim Cook had agreed to a massive pay cut this year, following a shareholder vote on his compensation package after its stock fell about 27% in 2022.
As consumer spending tightened, global smartphone shipments plunged 18% in the fourth quarter of 2022, according to market research firm Canalys. Apple’s business also faced supply chain hurdles linked to China’s Covid lockdowns and unrest that hit a key production site in Zhengzhou, China late last year.
Still, Apple’s business is weathering the downturn better than some of its fellow tech giants. In its most-recent earnings report, the company reported sales grew 8% year-over-year and that the company hit a September quarter revenue record for iPhone.
Thursday’s earnings results will show whether Apple can keep defying gravity.
“Apple continues to innovate with high-quality, industry-leading products supported by a powerful digital platform,” analysts at Monness, Crespi and Hardt wrote in an investor note Tuesday. “However, regulatory headwinds persist and we believe the darkest days of this downturn are ahead of us.”