Layoffs in the thousands by Amazon, Oracle and other tech-focused companies are routinely being blamed on Artificial Intelligence (AI), but affected workers and analysts see reasons beyond and behind it.
“AI has to drive a return on investment,” said N Lee Plumb, his team’s head of “AI enablement” in Amazon, commented on the reasons after being laid off.
Plumb said he knows for sure that being laid off from Amazon last week was not a failure to get on board with the company’s AI plans. He told news agency AP that he was so prolific in his use of Amazon’s new AI coding tool that the company flagged him as one of its top users.
Assumptions, theories and facts on tech layoffs
Many assumed Amazon’s 16,000 corporate layoffs reflected CEO Andy Jassy’s push to “reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company”.
The same theory has done the rounds about Expedia, Pinterest and Dow.
But economists are also wondering if AI is the real reason behind the layoffs or if it’s the message a company wants to tell its shareholders on Wall Street.
“When you reduce headcount, you’ve demonstrated efficiency, you attract more capital, the share price goes up,” Plumb, who worked at Amazon for eight years, said. “So you could potentially have just been bloated in the first place. Reduce head count, attribute it to AI, and now you’ve got a value story,” he added.
Plumb’s scepticism on AI as reason for job cuts is shared by many economists. “We just don’t know,” said Karan Girotra, a professor of management at Cornell University’s business school.
“Not because AI isn’t great, but because it requires a lot of adjustment; and most of the gains accrue to individual employees rather than to the organisation. People save time, and they get their work done earlier,” he said.
If an employer works faster because of AI, Girotra said, it takes time to adjust a company’s management structure in a way that would enable a smaller workforce.
He’s not convinced that’s happening at Amazon, which he said is still scaling back from a glut of hiring during the Covid-19 pandemic.
A report by Goldman Sachs said AI’s overall impact on the labour market remains limited, though some effects might be felt in “specific occupations like marketing, graphic design, customer service, and especially tech”.
But the bank’s economic research division said in its most recent monthly AI adoption tracker that, since December, “very few employees were affected by corporate layoffs attributed to AI”, though the report was published on January 16, before Amazon, Dow and Pinterest announced their layoffs.
What companies claims
San Francisco-based social media-sharing platform Pinterest was the most explicit in asserting that AI drove it to cut up to 15 per cent of its workforce.
Pinterest echoed that message in a regulatory disclosure that said the company was “reallocating resources to AI-focused roles and teams that drive AI adoption and execution”.
Expedia has voiced a similar message. Yet, the 162 tech workers that the travel website cut from its Seattle headquarters last week included several AI-specific roles, such as machine-learning scientists.
Dow’s regulatory disclosures tied its 4,500 layoffs to a new plan “utilising AI and automation”.
Amazon’s 16,000 corporate job cuts were part of a broader reduction of employees at the e-commerce giant.
At the same time as those cuts — all believed to be office jobs — Amazon said it would cut about 5,000 retail workers, according to notices it sent to state workforce agencies in California, Maryland and Washington, resulting from its decision to close almost all of its Amazon Go and Amazon Fresh stores.
That’s on top of a round of 14,000 job cuts in October, bringing the total to well over 30,000 since Jassy first signalled a push for AI-driven organisational changes.
What 2026 holds next
Like many companies, in technology and otherwise, but particularly those that make and sell AI tools and services, Amazon has been pushing its workforce to find more efficiencies with AI.
Meta CEO Mark Zuckerberg said last week that 2026 will be when “AI starts to dramatically change the way that we work”.
“We’re investing in AI-native tooling so individuals at Meta can get more done, we’re elevating individual contributors, and flattening teams,” he said on an earnings call.
“We’re starting to see projects that used to require big teams now be accomplished by a single very talented person,” he added, as per news agency AP.
So far, Meta’s layoffs this year have focused on cutting jobs from its virtual reality and metaverse divisions. Then there is the industry shifting resources and cash to AI development, which requires huge spending on computer chips, energy-hungry data centres, and talent.
CEO Jassy told Amazon employees last June to be “curious about AI, educate yourself, attend workshops and take trainings…”
Sacked employee Plumb said he was fully on board with that. He said he demonstrated his proficiency in using Amazon’s AI coding tool, Kiro, to “solve massive problems”.
“If you weren’t using them, your manager would get a report, and they would talk to you about using them,” he said. “There were only five people in the entire company who were a higher user of Kiro than I was, or had achieved more milestones.”
‘Need to cut costs, any reason is fine’
Cornell’s Girotra said it’s possible that increasing AI productivity is leading companies to cut middle management, but he said the reality is that those making layoff decisions “just need to cut costs and make it happen. That’s it. I don’t think they care what the reason for that is.”
Not all companies are signalling AI as a reason for cuts.
Home Depot has said it’s eliminating 800 roles tied to its corporate headquarters in Atlanta. Spokesman George Lane said that the cuts were not driven by AI or automation but “truly about speed, agility”.
Exercise equipment maker Peloton said it is reducing its workforce by 11 per cent as part of a “broader cost-cutting” move”.