Wall Street Has Stopped Rewarding 'Strategic' Layoffs (fortune.com)
- Reference: 0180455783
- News link: https://slashdot.org/story/25/12/25/1727221/wall-street-has-stopped-rewarding-strategic-layoffs
- Source link: https://fortune.com/2025/12/25/goldman-sachs-research-ceos-layoffs-stock-price/
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.
[1] https://fortune.com/2025/12/25/goldman-sachs-research-ceos-layoffs-stock-price/
smart wallstreet - they see this as bs (Score:2)
Many strategic layoffs are shortsighted executives firing their most senior engineers and technical experts. This is so they can fund AI and other "automation" tools. The problem is that these senior engineers are the "golden gooses", and create a ton of innovation that makes a lot of $$. Now said companies will just be hollow AI shells of what they were before.
Re:smart wallstreet - they see this as bs (Score:4, 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.
Re: (Score:2)
> 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: 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
Probably because it's a load of shit. (Score:2, Insightful)
Unless you're rsilvergun, you know just how poor of a substitute for human labor that AI really is. Could it be there some day? Maybe. But right now? Definitely not. I'd wager this has more to do with Trump's fucking trade wars, given that asshole only acts in his own best interest and never the country's. Either way, if you play stupid games with your investors, don't be surprised when they lose faith and they stop buying into your shit.
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.
Re: (Score:2)
Eliminate all online trading, to buy a stock a guy [1]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?
[1] https://www.youtube.com/watch?v=h-Z8_Mzmqgk
Re: (Score:2)
> 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.
Re: (Score:1)
> 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)
I think layoff getting rewarded was a vestigial artifact of 80s thinking, where layoffs meant computerization of more processes and increased efficiencies.
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:2)
+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.
Re: (Score:2)
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.
Re: (Score:2)
Other reasons are, mass adoption of a new technology and off-shoring.
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:1)
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, interacti
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"
fallacy (Score:1)
Preserving stock price from a temporary dip isn't the #1 priority of top executives. Guess again, it has nothing to do with stocks.
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
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:1)
It definitely sounds like the LLM bubble is bursting. Classic middle management wealth destruction.
Re: (Score:3)
Hopefully. The later this inane and demented hype runs, the larger the crash at the end.
Re: (Score:1)
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:2)
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: (Score:2)
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
Re: (Score:2)
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, an
Re: Long-term view, finally? (Score:2)
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.
Re: (Score:2)
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: (Score:2, Informative)
> 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: (Score:3, 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 shortag