Wall Street Has Stopped Rewarding 'Strategic' Layoffs (fortune.com) 74
Goldman Sachs analysts have identified a notable shift in how investors respond to corporate layoff announcements, finding that even job cuts attributed to automation and AI-driven restructuring are now causing stock prices to fall rather than rise. The investment bank linked recent layoff announcements to public companies' earnings reports and stock market data, concluding that stocks dropped by an average of 2% following such announcements, and companies citing restructurings faced even harsher punishment.
The traditional Wall Street playbook held that layoffs tied to strategic restructuring would boost stock prices, while cuts driven by declining sales would hurt them. That distinction appears to have collapsed.
Goldman's analysts suggest investors simply don't believe what companies are saying -- firms announcing layoffs have experienced higher capex, debt and interest expense growth alongside lower profit growth compared to industry peers this year. The real driver, analysts suspect, may be cost reduction to offset rising interest expenses and declining profitability rather than any forward-looking efficiency play.
Goldman expects layoffs to keep rising, motivated in part by companies' stated desire to use AI to reduce labor costs.
The traditional Wall Street playbook held that layoffs tied to strategic restructuring would boost stock prices, while cuts driven by declining sales would hurt them. That distinction appears to have collapsed.
Goldman's analysts suggest investors simply don't believe what companies are saying -- firms announcing layoffs have experienced higher capex, debt and interest expense growth alongside lower profit growth compared to industry peers this year. The real driver, analysts suspect, may be cost reduction to offset rising interest expenses and declining profitability rather than any forward-looking efficiency play.
Goldman expects layoffs to keep rising, motivated in part by companies' stated desire to use AI to reduce labor costs.
Long-term view, finally? (Score:5, Insightful)
If I see a company hiring, it's reasonable to conclude they're doing well and might have good future.
If a company is laying off, sure they might be short-term cost-cutting / profiting, but I would be concerned about their long-term.
Maybe investors are learning? Maybe AI's learning is helping investors see bigger picture?
Re: Long-term view, finally? (Score:3, Interesting)
It definitely sounds like the LLM bubble is bursting. Classic middle management wealth destruction.
Re: Long-term view, finally? (Score:5, Insightful)
Hopefully. The later this inane and demented hype runs, the larger the crash at the end.
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What is your opinion on AI research assistants (operating more or less autonomously)?
Things seem to be moving quite hard in that direction, especially at Google [research.google] and OpenAI. The growth of agentic software engineering and especially the procedures developed in 2025 that mitigate the hallucinations of LLMs and allow productive longer autonomous runs seem to be very applicable to research assistants.
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That will be a complete failure. Agents are unreliable, hallucinating and have already been used as attack vectors in several different ways. None of these problems can be fixed.
And no, you CANNOT fix LLM hallucinations. They are an integral part of the approach. Anybody that tells you they can fix these is lying to you.
Revenue and inflation (Score:2)
Wall Street has ignored the top-line sales number for decades and has rewarded company moves to improve earnings via cutting jobs and laying off people.
The extension of the AI hype and increase in AI company borrowing has pushed analysts back to looking at the company balance sheet and ability to be viable in the next 5 years.
Sales revenue accounting for inflation has declined for many large companies in the last decade. Pfizer has a more than 25% decrease, for example.
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Nah, these AI companies keep coming out with new models to keep the hype train rolling, and as long as that drives in more investment, it's not going to pop. Rather, institutional investors are calling BS on the non-AI companies who say "we're shedding some of our workforce because AI means we don't need them anymore, which means more money in the future!" in their quarterly statements. I think it's just trying to mask the fact that they're underperforming, and that's what I think the institutional investor
Re: Long-term view, finally? (Score:3)
Not sure if it's bursting yet but the bubble mechanics definitely keep shifting. If layoffs - being companies being on a resource diet plans - are no longer bringing in value, then it makes you wonder what is the next thing for companies to do. What sort of new hell/metric they are going to bring.
Logic suggests that companies should be valued based on their performance, their ability to actually create value, but we all know that instead of creating value they will instead try every trick in the book to bul
Re: Long-term view, finally? (Score:4, Interesting)
There's another trick companies are pulling, they are delisting or never listing on the stock exchanges and going to private equity markets. Those investors too are starting to get the chills. It appears that company listings on stock exchanges has dropped 50% from 1990 (https://www.forbes.com/sites/wesmoss/2025/02/03/the-decline-in-us-stocks-to-choose-from-what-it-means-for-investors/ however, going to that site means wading through a blizzard of cross-site crap that noscrpt is blocking for me). According to Forbes, the trend is due to M&A and firms refusing to go public. The private equity markets aid the latter.
Re: Long-term view, finally? (Score:5, Interesting)
The reason not to go public is that Wall Street has a tendency to force your company to stray from its mission in favor of faster growth. Case in point, southwest airlines: You can't be the most loved airline if you're going to throw out basically everything that your customers liked about you to begin with. But some activist Wall Street investor believes they'll grow faster by being more like other airlines. Are they right? Maybe. Time will tell. Other investors seem to believe so. If they were private, and closely held by people who shared that vision, they wouldn't have had to do that. Their CEO didn't want to until a hedge fund forced his hand.
I work for a company that is privately held, and it's nice not having to care even the slightest about the monetary growth treadmill in the quarterly reports. Rather, we get to define our own measurements for results. We don't answer to Wall Street. Same thing applies if you work for a nonprofit (and don't make the mistake of assuming that nonprofits aren't profitable to their stakeholders -- it isn't even remotely true.)
Re: Long-term view, finally? (Score:5, Insightful)
You're absolutely right. I work for a company that used to be private and went public at the start of 2025. Things have been on a rapid decline ever since.
It's like going public changes the game, changes your definition of success, and instead of doing the right thing all they start doing is kissing shareholders' arses.
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The reason not to go public is that Wall Street has a tendency to force your company to stray from its mission in favor of faster growth. Case in point, southwest airlines: You can't be the most loved airline if you're going to throw out basically everything that your customers liked about you to begin with.
I actually hate Southwest Airlines and refuse to fly them because I don't like how they run their airline. And I have had enough of their fans who get screwed over by them (We bumped you - ha ha ha!) and act like all their bs is somehow "normal".
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'refuse to fly them because I don't like how they run their airline.'
Um, this is the complaint by someone about every single airline, the only possible exception Qatar Airways, and there it's just pricing complaints, which are universal also.
Really, SWA is not unique in this. And they are not unique in finally annoying a measurable fraction of their customer base. Most other US domestic airlines did that decades ago, and have just perfected the annoyances/profit expanders since.
Such low-hanging fruit. You c
Re:no it is simple (Score:4, Informative)
It used to be that once you had 500 shareholders (including stock option holders) you had to go public. The JOBS Act raised that to 2000
You have to register with the SEC and make public financial disclosures at that point, but you don't have to "go public" in the way that term is being used on this thread, i.e. shares become publicly traded so people can buy them and force your company to do things.
There are many large privately-held companies out there. Forbes publishes a list: https://www.forbes.com/lists/t... [forbes.com]
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Logic suggests that companies should be valued based on their performance, their ability to actually create value,
Then Nvidia should be valued far higher than it is. Its quarterly and yearly performance blows other companies out of the water. They create value for their sharholders via the selling of billions of dollars worth of product.
I'm not discussing whether their predictions on AI are true, only that they are selling products hand over fist and making billions of dollars doing so.
Re: Long-term view, finally? (Score:2)
Their P/E is in the 40s, whereas Tesla is almost ten times that. Which do you think is more correct?
Re: Long-term view, finally? (Score:4, Informative)
Consideing SpaceX has been buying a buttload of Cybertrucks [futurism.com] to prop up sales, it's obvious which company is better.
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"Their P/E is in the 40s, whereas Tesla is almost ten times that. Which do you think is more correct?"
why is that even a question? Tesla's valuation has never been tied to reality
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Their P/E is in the 40s, whereas Tesla is almost ten times that. Which do you think is more correct?
TSLA valuation is wildly out of whack. Not only is the PE nonsensical, but their sales and market share in the US and China, which constitute two-thirds of their sales, are declining.
TSLA valuation is based entirely on speculation that they will dominate autonomous driving and robotics and that the sizes of these markets will skyrocket. These are the types of bets that venture capital chases, but somehow Wall Street is acting like venture capital. Well at least some investors are, even though the average 1-
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Take the carbon credits out and do the math again.
Re: Long-term view, finally? (Score:2)
You're confusing two different things? The AI investment bubble is one thing, but companies with no pokers in that fire reducing headcount because of lower profits and blaming/crediting *wink *wink AI efficiency, that's a whole other thing riding on the coat tails of AI hype.
It's like ... datacenter to cloud migrations. To "save money". Yes that requires stupid levels of cloud hype, but now that it's called out as unrealistic and an excuse to cut a bunch of shit that could have been cut in place, it doesn't
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If a company is laying off, sure they might be short-term cost-cutting / profiting, but I would be concerned about their long-term.
It's either because they're doing poorly and trying to cut costs to keep their nose above water, or they're doing strategic cost-cutting, like shedding a business division that no longer makes any strategic sense or is underperforming badly with no hope of getting a return, or getting rid of unnecessary operating expenses (i.e. middle managers.) The former is probably going to lower their value, where the latter will probably raise it. I think they're playing stupid games in trying to make it look more like
Re:Long-term view, finally? (Score:5, Interesting)
Or investors are not believing the AI hype.
Companies that have laid off staff and replaced them with AI have found they need to re-hire staff because AI doesn't work out. Or they're discovering to their horror that their AI chatbot is legally responsible for what it says so when it makes a mistake, they can be held to that error.
Couple that with AI running costs including the high depreciation, extreme amount of resources required, etc and the savings seem hard to materialize. Remember the whole RAM shortage thing affects companies using AI as well since they need memory to run those huge models.
Investors are simply getting impatient and want to start seeing returns on their money.
Re: Long-term view, finally? (Score:3)
Or investors are not believing the AI hype.
Companies that have laid off staff and replaced them with AI have found they need to re-hire staff
I'm calling bullshit on companies laying off staff and replacing them with anything. Prove it. It's bullshit. It plays on AI hype, it is not even the AI hype.
Vibe coding is AI hype, for example
Laying people off because of AI is some meta hype bullshit. It's being spread equally by companies doing desperate layoffs and anti-AI bozos building the same strawman together, that AI is so good it can be used in exactly the irresponsible ways you imagine.
Go back to the past ten layoff announcements in your news fee
AI layoffs are fake (Score:2)
We are actually seeing this with radiologists. A job where AI is better than humans but the AI requires a knowledgeable human. Demand for radiologist has increased not decreased.
Re: Long-term view, finally? (Score:2)
In the early 2000s, all you needed to do to boost your stock price was announce you were closing a plant in the US and moving it to China.
Fake job postings (Score:3)
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Yes, fake job listings have always been around, for many reasons. Here's an oxymoron: "business ethics", should be "business lacks ethics". If they had to pay applicants for the time wasted applying for fake job ads, maybe things would improve (would require some kind of class-action lawsuit of course).
In the 90s I worked at a small medical equipment company, mostly doing IT, systems, some coding. One day the VP walks in to my office, plops a resume on my desk and asks me to interview a guy. I didn't know w
Re: Fake job postings (Score:2)
LinkedIn, if they want to gain any credibility with job seekers should require job posters to indicate when the job was filled and whether it was an internal or external candidate.
smart wallstreet - they see this as bs (Score:5, Informative)
Re:smart wallstreet - they see this as bs (Score:5, Interesting)
Yep, excessively stupid. Also works like that on the lower end. One of my part-time students got fired from his job as security engineer this year. His manager really wanted to keep him, his skills are desperately needed and with NIS2 and the CRA will become even more needed, hiring people with that skill-set is hard, he is really smart and he is completing his education. There are no better workers to keep. But no, the higher-ups had some algorithm that said to fire him.
On the plus side, we managed to hire him as an academic assistant. Their loss, our gain.
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the higher-ups had some algorithm that said to fire him.
I am afraid there is a lot more of this in our collective future. Having GIGO algorithm making managerial decisions seems like inevitable future of tech. After all, they will have to find some use for all that unwanted AI (might as well replace equally useless consultants with AI, right?).
Re: smart wallstreet - they see this as bs (Score:3)
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That really depends on the consultants. Management consultants are usually not very good and have huge egos. Engineering consultants range from incompetent to absolutely excellent.
Re: not just that (Score:2)
The better move is to proactively root out lazy workers because laziness spreads like a cancer among other workers.
As a group of employees, the better move is to discourage workers doing overtime, because sycophantic subservience to a corporation at the expense of personal wellbeing and work-life balance spreads like a cancer among other workers
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No, rather many are laying off because sales are slumping, period, and the AI is just an excuse to keep their stock price up, since mass layoffs generally have to be publicized. They may then start a few AI pilot projects as a cover story ("we're automating, not shrinking) in case an investor asks for evidence.
However, they can't pull this trick forever, because eventually they have to publish their revenue. A few banking tricks can delay an offi
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Hilarious how they're selling the AI as "innovation" and use it to get rid of anyone at the company who could possibly innovate.
Company run by AI can only reproduce what's been done before - at best. Much like an LLM can only reproduce what it's seen before.
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This. It's a good indicator, actually. If layoffs include management (the part of a company most prone to accumulating useless overhead) and mostly excludes the departments actually creating the product the company sells, then they might actually be useful.
A major company in my home country just did that. After 20+ years of going down the drain, a new CEO has started the usual layoffs, but this time the first thing she did was cut the board of directors in half. And for the first time in 20+ years I'm think
Sanity? On WALL-STREET? (Score:5, Insightful)
Hell must have frozen over. Obviously, sacking people you may well desperately need in the not too distant future is an excessively dumb move.
But Wall-Street has noticed? Are they not all about mindless short-term greed?
Obviously, the whole gambling venture should be shut down and stock-trading should be a thing you do because of the dividend. And things should be slow. Like you hand in an order or offer and then a randomized delay of 1-10 days applies, or something like it. At that point, the whole thing could become beneficial to society again, instead of just making some already rich assholes even richer, while taking from everybody else.
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Eliminate all online trading, to buy a stock a guy has to do it on the trade floor. [youtube.com]
Depending where you look 70-90% of day traders lose money long term so who has this democratization of trading benefited? What has it really added?
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Depending where you look 70-90% of day traders lose money long term so who has this democratization of trading benefited? What has it really added?
That does not surprise me one bit. They essentially come unarmed or weakly armed to a battle of wits. There is always plenty of suckers fleece though.
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Everyone who's not a day trader, apparently.
Being able to buy stocks without knowing a guy who knows a guy who's got one of the special gigs in a particular building benefits lots of regular people who can buy (and hold) stocks without paying someone a big fee. The day traders all know a guy who knows a guy anyway.
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It was never special gig's or having some secret knowledge, this article is about Goldman Sachs, that's how it used to be done, you would have an account with a firm like that. You had one "guy" who was your broker. You'd call him up and say "hey, buy these" and that's it. I mean Homer Simpson had a stock guy, it wasn't something out of reach for the
I wasn't even really serious about that but it's the idea of having just a little bit of friction in the process can be a good thing. If you agree with the
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And your broker would have to know somebody, who likely knew somebody else who actually had one of those special positions on the floor. Middle man after middle man.
There are lots of ways to add friction without going back to that tower of middlemen.
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But Wall-Street has noticed? Are they not all about mindless short-term greed?
They never have, I don't know why you guys keep telling yourselves this. Any investor that's worth a shit plays the long game. I get that you don't save for retirement or otherwise do any investing at all, but those of us who do and who have done well in the market know this. That, by the way, includes investors who do shorts, namely they're counting on long-term poor performance to trigger immediate term share value decreases that they then profit from. And no, day traders aren't investors. The reason quar
Old guys finally aged out... (Score:2)
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Maybe. If so, they are very late to finally do away with it.
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At this point, even random people on the street could tell you it's a bubble. It's something getting shoved into their face on their phones and computers daily, even if they avoid the news.
Nobody was talking about subprime mortgages before the 2008 crash. Not normal people, not the press. The AI bubble is different. Everyone sees it in advance.
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At that point, the whole thing could become beneficial to society again, instead of just making some already rich assholes even richer, while taking from everybody else.
This isn't some unwanted side-effect, though. *This the point.* Wall Street, the stock market, the entire finance sector may have been something else in the past, but it has primarily been a wealth-transfer engine for the benefits of those with wealth and connections, for decades. Just wait for the current hype cycle to come apart, and watch the government make the capitalist-class whole to the detriment of the public.
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No argument from me on that. All the efforts to get people to put their money into stocks of the last 20 or 30 years make a lot of sense in hindsight.
It's a logical progression (Score:5, Insightful)
I seem to recall that the reason "targeted layoffs" and "restructuring" raised stock prices was due to the expectation that the company would be more profitable on the short term. But many times it's an indication of suits pursuing quarterly profits at the expense of the company's future. Or more specifically, make the company more attractive for purchase.
An example might be laying off the entire engineering department and concentrating on marketing the heck out of current products. This works (sometimes) but only long enough for the execs to jump ship before people discover it's been hulled below the water line.
I'm all for NOT rewarding this kind of behavior, frankly. It just leaves behind a collection of violated, failing companies.
I think Goldman is basically coming to the same conclusion. In fancier words.
As to companies replacing personnel with AI, to execs who don't know any better, this may seem like a gold mine. Expect moving forward companies selling products containing code nobody understands. And probably, marketing materials containing six fingered hands.
Re: It's a logical progression (Score:4, Insightful)
+1, insightful
And basically what I came here to write.
Companies have been shrinking for reasons that have nothing to do with AI, and attributing the shrinkage to AI because "we're getting desperate" doesn't play well on Wall Street.
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Well said. And I'd add that the fact it doesn't play well on Wall Street is a good thing.
Layoffs and restructurings mean one thing (Score:3)
That the company business plan has failed, that management isnt successful, and the strategy is wrong and uncertain. Layoff announcements should result in executives being fired for poor performance
Re:Layoffs and restructurings mean one thing (Score:4, Insightful)
They don't always indicate any of this -- if they did, then you'd conclude AT&T was failing in the 80s when they were shedding switchboard operators.
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When poor performance is first realized, the usual response is freezing wages: Making the bottom-tier employees compensate the business for lost profits. Yes, such executives should be fired.
Lack of money isn't a problem anymore. (Score:3, Interesting)
Lack of people is. This is also the global demographic collapse slowly kicking in.
Point in case: I've stopped buying IT and software development literature and in recent years started actively working on behavioral economics, mindfulness, social skills, attachment theory and modern avant-garde Interpersonal psychology. Relationships are quickly becoming waaay more important and powerful than tech skills.
In 2026 I'll still be developing but I'm going to focus 80% of my energy on social integration, interaction and mental and physical health. This is where the party is in the upcoming future, especially with AI taking over and people becoming more scarce. The stock market is noticing this too.
Maybe somebody has a clue (Score:2)
It's entirely possible that some investors see that the rush to implement immature tech may not be a good idea.
Hypemongers and lying salesweasels have sold immature AI products to clueless executives with expected results.
Most early deployment will fail to achieve the promised success.
Future AI has great potential, but it's still early in its development.
Unfortunately, clueless executives under the influence of FOMO insist on being part of "the next big thing"
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Layoffs are bad for business (Score:2)
Why does a company have employees? To perform labor at a cost below what the labor contributes to the business. That is, a business normally seeks a profit whenever it hires someone. That should make sense to both capitalists and Marxists.
So with that premise in place, what kind of business throws away money with a layoff. Cutting your payroll expenses looks good on the books, at least for a quarter. But if you had something valuable, like an employee willing to work for less than what you can make from the
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That should be true. People like Jack Welch convinced the corporate world otherwise. What fools they were to listen to him.
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Not every employee continues to generate a profit. When you hire a plumber to come and fix your toilet do you continue paying them indefinitely? No, when your toilet is no longer broken you "let them go."
Ideally companies would hire and lay off workers more often. That's good for the company AND good for the worker. Hire a bunch of programmers to work on a big software project then lay them off when it's done, letting them go off and do what they do best
Aside from AI (Score:4, Interesting)
Aside from AI, I think there are a few fundamental problems with the way these things work in corporations.
1. Modern publicly owned companies are expected to continually grow and cut costs, every year.
In reality, any given group within the company might be able to find genuine cost reduction opportunities in year 1 or year 2, but beyond that, it becomes a sort of game, where they set up a project to implement a new cost cutting initiative, for which no one involved has any confidence of success. And yet no one is willing to admit it, as that would make them "not management material".
2. Any new leader is expected to make changes.
If changes are needed, then that it appropriate. But if no significant changes are needed, the new leader is likely to make big changes anyway. It's a show of strength, and it feels like progress. In the end it can result in more harm than good.
Small comanies, and some privately owned companies are immune from this. So it is largely a big company problem.
ok (Score:1)
Goldman Sacs for the L (Score:2)
>Goldman expects layoffs to keep rising, motivated in part by companies' stated desire to use AI to reduce labor costs.
AI has yet to be proven as an actual driver of layoffs. Layoffs are happening because the economy is in the shitter. Have you noticed? Everything is in a shambles and the President can kick over the house of cards on a whim with another EO.
AI has to actually do the job of the people it is replacing, or enough of it to not tank the company immediately. There are few places where AI can do
Layoffs mean the company failed somehow... (Score:2)
Exactly like the nineties (Score:2)
When CEOs stopped "downsizing" (which I called "undersizing") only when Wall St. stopped rewarding their stock options.
In this case, I think it's another bit of evidence of the beginning of the bubble going.
Layoffs are bad, M'kay? (Score:2)
Investors are tired of pretending that cutting staff is a sign of strength in a business -it is not. It is a sign of weakness. An attempt to cover up failure.