What PayPal and 26 other companies have said about layoffs this year

Consider investment banking giant Goldman Sachs Group (ticker: GS). CFO Denis Coleman said on Jan. 23, while discussing fourth-quarter results, that the bank had a headcount reduction earlier this year, shedding 3,200 employees, and “we expect to benefit in 2023 north of $200 million associated with it.”

Credit bureau company Equifax ( EFX ) said on February 9 that it plans to cut over 10% of its employees and contractors in 2023. The actions, among others, will drive an estimated cost reduction of about $200 million in 2023, CEO Mark Begor said .

Among technology companies, Western Digital’s ( WDC ) CEO David Goeckeler said last month that the hard drive seller had reduced its quarterly adjusted operating costs by more than $100 million since the end of fiscal 2022 by cutting staff, among other things.

Snap ( SNAP ) said it continues to wind down various operations to take $450 million out of its cost base. Investors will see the full benefit of this reduction in the first quarter, which ends in March, said Chief Financial Officer Derek Andersen, citing the current reduced headcount, down 20% from the peak in the second quarter.

PayPal Holdings (PYPL), a fintech company, said last week that it has identified an additional $600 million in cost savings for 2023 on top of the previously planned $1.3 billion due to “the very difficult decision to reduce the number employees by 7% as we continue to improve our processes.”

Other companies on the list of about 27 include healthcare Baxter International ( BAX ), News Corp ( NWSA ), the owner of Barron’s and The Wall Street Journaland insurance brokerage firm Marsh & McLennan (MMC)

These are only the companies that have talked about layoffs on their earnings calls. Overall, about 380 companies have laid off employees this year in the tech industry alone, according to Layoffs.fyi, though not all have discussed the benefits to the bottom line. Spotify Technology (SPOT)
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for example, declined to quantify savings from the headcount reduction when asked by an analyst on a fourth-quarter earnings call. The streaming music service company announced plans to cut about 6% of its workforce across the company in January.

Unfortunately, specifically for tech workers, more layoffs could be in the cards, according to Savita Subramanian, chief U.S. equity and quant strategist at BofA Global Research. Subramanian, in a note this month, said the tech has more costs to cut given the 20% excess hiring over the past three years.

That’s “too high relative to real sales growth,” she noted. “Technology is still too bloated even after layoffs.”

BofA calculated that announced layoffs would represent an estimated 1.7 percentage point average operating lift, defined as cost savings as a percentage of 2022 sales for growth companies.

Lower costs can be major drivers of earnings and revenues. A cost-cutting announcement could please investors, even if the fundamentals of these companies have worsened overall.

For example, despite a broader advertising pullback, investors have cheered Meta Platform’s ( META ) stock in part because CEO Mark Zuckerberg lowered the investment outlook and told analysts the company would shed some layers of middle management. The Meta share is up 44% this year.

Beyond technology, FedEx

‘s (FDX) stock was recently upgraded by both Citi analyst Christian Wetherbee and BofA Securities analyst Ken Hoexter to Buy from Hold on growing signs of cost control despite falling shipping volumes given the weakening economy. The logistics company announced a plan to reduce the number of managers by 10%. Hoexter estimated 40 cents quarterly earnings per share on a tailwind. The share is up 22 percent this year.

“The prescription was easy for Wall Street this earnings season,” said Edward Moya, senior market analyst at brokerage OANDA Barron’s. “Announce cost-cutting measures and layoffs, and your stock prices will rise.”

If only it were that easy for the workers.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com