The tech sector is seeing 'the clock strike midnight' after hyper-growth era as Microsoft adds to the wave of layoffs, Wedbush says

• Microsoft's latest slate of layoffs means the tech sector is entering a new phase, according to Wedbush.
• Analyst Dan Ives said, "We are seeing the clock strike midnight for the tech sector."

The tech sector is experiencing a major shift as Microsoft joins Amazon, Meta and Salesforce in announcing major layoffs, according to Wedbush's Dan Ives.

On Wednesday, the software giant said it's cutting 10,000 employees through March 31 amid slower revenue growth and is taking a $1.2 billion charge.

In a note, Ives said Microsoft's layoffs amount to about 5% of its workforce and come as no surprise after hiring about 75,000 since 2019 and spending money "like 1980's Rock Stars to keep pace with eye-popping demand."

But while Microsoft will continue to spend on the cloud, acquisitions and innovation, it will pull back on non-strategic areas like hardware, he said, maintaining an outperform rating on the stock and a $290 price target.

"We are seeing the clock strike midnight for the tech sector after a decade of hyper growth and now major layoffs are being seen at MSFT, Salesforce, Meta, Amazon, among many others across the Valley," Ives wrote. "This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud as management teams navigate this Category 5 near-term economic storm."

Meanwhile, Amazon is set to announce yet another round of layoffs afflicting 18,000 employees, following an earlier round of cuts in November. The layoffs follow a massive hiring spree during the height of Covid-19 which brought the company's global workforce to 1.6 million.

Meta told employees to prepare for a large scale retrenchment in November, slashing 11,000 employees. And Salesforce scaled back 10% of its employees earlier this month after the company's chief executive admitted the firm grossly over hired.

Google parent Alphabet and Elon Musk's Twitter are among other tech giants shrinking their headcounts as well.