Tech Layoffs: CEOs Blame AI, But Reality Is More Complex

The prevalent narrative emerging from 2025 tech industry mass layoff announcements often suggests artificial intelligence (AI) is directly displacing workers. However, a closer examination reveals a more intricate picture, where companies strategically position these workforce reductions to signal efficiency to Wall Street, all while preparing for the broader transformations AI is expected to bring.

According to a recent report from career website Indeed, tech job postings in July were down 36% compared to early 2020 levels. While AI is a contributing factor to this stalled rebound, it’s not the sole or most obvious cause. The introduction of generative AI tools like ChatGPT in late 2022 coincided with the conclusion of a significant pandemic-era hiring surge, making it challenging to isolate AI’s specific influence on the subsequent downturn in tech recruitment. Brendon Bernard, an economist at the Indeed Hiring Lab, notes that the tech job market’s current weakness mirrors a cooling trend across other sectors. “Tech job postings have actually evolved pretty similarly to the rest of the economy, including relative to job postings where there really isn’t that much exposure to AI,” Bernard stated.

Despite this nuance, AI frequently features in the messaging accompanying recent tech layoff announcements. When Workday CEO Carl Eschenbach announced workforce reductions earlier this year, he encouraged employees to consider the wider context, stating that “companies everywhere are reimagining how work gets done, and the increasing demand for AI has the potential to drive a new era of growth for Workday.” Similarly, Autodesk CEO Andrew Anagnost cited the need to redirect resources to “accelerate investments” in AI as a reason for cutting approximately 9% of staff, or 1,350 jobs. CrowdStrike CEO George Kurtz also justified a 5% job cut by emphasizing the cybersecurity firm’s need to intensify AI investments to “accelerate execution and efficiency,” adding that “AI flattens our hiring curve, and helps us innovate from idea to product faster.”

This trend extends beyond U.S. borders. India’s tech giant Tata Consultancy Services described its 12,000 layoffs (2% of its workforce) as part of a shift towards becoming a “future-ready organization” through workforce realignment and “deploying AI at scale.” Even the Japanese parent company of Indeed and Glassdoor attributed 1,300 layoffs at its job search and review sites to an AI-driven shift.

The emphasis in these announcements often appears to be on AI-driven investment and strategic realignment rather than direct job replacement. Microsoft, for instance, has announced approximately 15,000 layoffs this year, even as its profits have surged. CEO Satya Nadella framed these difficult decisions as an opportunity to reimagine the company’s mission for an AI era. Wall Street has largely welcomed these promises of a leaner operational approach, particularly from tech giants justifying substantial capital expenditures for the data centers, chips, and other infrastructure required to power AI technologies. Bryan Hayes, a strategist at Zacks Investment Research, described this as a “double-edged sword restructuring,” where companies must balance appropriate headcount with AI’s growing prominence. Google recently announced it would increase its capital expenditure budget by an additional $10 billion to $85 billion, with Microsoft expected to outline similar spending plans soon. These investments, Hayes notes, directly improve profit margin outlooks, such as Microsoft’s for fiscal year 2026.

The broader impact of these layoffs on tech workers’ employment prospects remains complex. While AI will undoubtedly replace some jobs, it is also poised to create many new ones. Hayes emphasizes that “employees that are able to leverage artificial intelligence and help the companies innovate and create new products and services are going to be the ones that are in high demand.” This is evident in companies like Meta Platforms, which is actively recruiting elite AI scientists from competitors with lucrative compensation packages.

Indeed’s recent reports indicate that AI specialists are faring better than traditional software engineers, though even these specialized roles have seen a decline from their 2022 peak, albeit remaining above pre-pandemic levels. “Machine-learning engineers—which is kind of the canonical AI job—those job postings are still noticeably above where they were pre-pandemic, though they’ve actually come down compared to their 2022 peak,” confirmed Bernard.

Economists are particularly monitoring AI’s effects on entry-level tech positions. Indeed’s data shows significant hiring declines in AI hubs like the San Francisco Bay Area, Boston, and Seattle. The deepest impact has been on entry-level roles, with workers possessing at least five years of experience faring better. Notably, the sharpest declines occurred in entry-level marketing, administrative assistance, and human resources roles—areas where tasks often overlap with the capabilities of generative AI tools, which can efficiently create documents and images. Bernard noted that while the overall plunge in tech hiring began before the current AI surge, the shift in experience requirements is a more recent development.

In essence, while AI is a significant force shaping the tech industry, its role in current layoffs is multifaceted. It often serves as a strategic narrative for corporate restructuring aimed at efficiency and future growth, driving massive infrastructure investments, and simultaneously reshaping the demand for specific skills within the tech workforce, particularly affecting entry-level positions.