Big technology companies achieve record profits in 2023 after cutting their workforces

The formula for the historical record profits achieved by large technology companies in 2023 mixes a dose of income growth with another of cost containment. Although the results of each company tell somewhat different stories from each other, artificial intelligence has become an engine of growth on the revenue side. In terms of expenses, the technology giants have made widespread and unprecedented job cuts of 46,000 jobs in the last year.

Together, Apple, Microsoft, Alphabet, Meta and Amazon earned 326,772 million dollars (about 300,000 million euros at the current exchange rate), a record figure that exceeds that of the previous year by 25.6% and beats the aggregate record 2021. The turnover has increased by 8.3%, to 1.63 trillion dollars, in this case somewhat weighed down by Apple, which experienced a drop in revenue in 2023, mainly due to the negative evolution in China.

The big technology companies, in addition, said goodbye to 2023 in top form. In the fourth quarter, the period with the greatest economic activity, revenues grew by 11.9%, to $478 billion, and profits soared by 55.6%, to $101,114 million.

The results reports and presentations to analysts by top executives have been loaded with references to artificial intelligence, converted at the same time into a business opportunity, source of income and battlefield for large technology companies.

The one that best surfs the wave of new technology is Microsoft. The company led by Satya Nadella has become the most valuable in the world and exceeds three billion capitalization thanks to OpenAI and the integration of artificial intelligence into its products and services. Its fiscal year closes in June, but in the calendar year 2023 the company increased its turnover by 11.5%, to a record of 227,583 million dollars, and profit by 22.4%, to 82,541 million.

In the fourth quarter of 2023, billing and results grew at rates of 17.6% and 33.2%, respectively, with impressive margins. “It has been a record quarter,” Nadella stressed in the conference with analysts, highlighting the strength of Microsoft Cloud, the cloud computing unit that already represents more than half of its revenue. “We have gone from talking about AI to applying it at scale. By infusing AI into every layer of our technology stack, we are winning new customers and helping drive new benefits and productivity gains,” she added. The company believes that new technology will transform work and is taking advantage of this moment in artificial intelligence to redefine its role in business applications, with the idea that AI will become a prominent part of every personal computer this year.

Microsoft has taken the lead on Alphabet, which initially seemed best placed to lead the new technology. The company continues to rely heavily on advertising revenue from its Google search engine and its YouTube video service, although it is also betting on cloud computing and data centers. The group increased its turnover by 8.7% to a new high of 307,394 million dollars in 2023 and improved profit by 23%, to 73,795 million, somewhat below the record of 2021. In the fourth quarter it accelerated and improved its profit 52%, up to 20,687 million dollars.

In conferences with analysts over the last year, Alphabet CEO Sundar Pichai has seemed a bit defensive, trying to demonstrate the group's progress in the new technology: “We have been leading the use of AI to improve many of our products, from search to ads, through most of our business and consumer products, already helping billions of people,” he insisted this week in the results conference.

Cost containment

Pichai also emphasized cost containment: “We are being disciplined in the way we run the company. You've already heard me talk about our efforts to permanently redesign our cost base and improve our speed and efficiency. That work continues. “Teams work to focus on key priorities and act quickly, removing layers and simplifying their organizational structures,” he said. He didn't mention it, but Alphabet reduced its workforce for the first time in 2023, going from 190,200 to 182,500 employees.

The one that takes the cake in cost containment is Meta. Mark Zuckerberg announced that 2023 was going to be a year of belt-tightening. The company reduced its workforce by 22.2%, from 86,500 to 67,300 employees, cut rental expenses and delayed investments. Meanwhile, its income has grown strongly, thanks to better advertising management with artificial intelligence tools and the pull of traffic and demand itself. Revenue increased by 15.7%, up to 134,902 million. With this, its profit has skyrocketed by 69%, to 39,098 million, despite the multimillion-dollar losses suffered in the metaverse and augmented reality. The company announced the payment of a dividend and expanded its share repurchase plans and the stock market soared more than 20% this Friday.

“2023 was our year of efficiency, focused on making Meta a stronger technology company and improving our business to give us the stability necessary to deliver on our ambitious long-term vision for AI and the metaverse. And last year, we not only met our efficiency goals, but we returned to strong revenue growth,” Zuckerberg told analysts.

Apple presented results on the eve of the launch of its own smart glasses, the Vision Pro. “At Apple we live for moments like these. That's why we do what we do. That is why we are so dedicated to innovation and so focused on pushing technology to the limits,” CEO Tim Cook said in the conference with analysts. Cook reported results for the first quarter of its fiscal year in which the company has returned to the path of growth after four quarters of decline. In the entire calendar year 2023, Apple had a turnover of 385,706 million, 0.5% less than in 2022. Despite this, it increased profits by 6% in those 12 months, up to 100,913 million, a new record.

Apple is another company that seems to have lagged a little behind Microsoft in artificial intelligence, but anticipates new developments: “We will continue to invest in the technologies that will shape the future. “That includes artificial intelligence, which we continue to dedicate an enormous amount of time and effort to, and we will be very happy to share the details of our ongoing work in that area later this year,” he said. Analysts asked him several times, but Cook was evasive: “We have some things we're excited about that we'll talk about later this year,” he said. “Let me just say that I think there is a huge opportunity for Apple with generative AI and AI, without going into more detail or getting ahead of myself,” he apologized.

Amazon, the Big Tech revenue leader thanks to its e-commerce business, has also combined AI-driven revenue gains (including the growth of its data and computing unit, AWS), with a containment effort. of costs very much in the style of Andy Jassy, ​​the CEO. Jassy has tried to combat Amazon's open bar culture, in which for many years the important thing was to grow at any price. The company closed 2023 with 16,000 fewer employees than the previous year and continues to cut positions in some areas. The increase in sales of 12%, up to 574,785 million in the year, together with cost control, has allowed the company to earn 30,722 million in 2023 with the best operating results in its history.

Of course, in his conference with analysts, he also talked about artificial intelligence: “Generative AI is and will continue to be an area of ​​widespread attention and investment at Amazon, mainly because there are few initiatives, if any, that give us the opportunity to reinvent so many of our customer experiences and processes, and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon in t
he coming years,” Jassy said.

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