Job cuts are usually associated with companies in financial difficulties. But the planned headcount reductions announced recently by companies such as Meta, Microsoft and Oracle come against the backdrop of massive profits.
In the first quarter of this year, Meta had earnings of $55 billion (€47 billion). Microsoft made $38 billion. Both have enormous gross profit margins, but also massive investment needs. And it is here we find the reason for pressure to make savings, as the huge cost of artificial intelligence (AI) investment puts pressure on cash flow and investors look for evidence that there is a pay-off for all the money being spent.
Amazon, Meta, Microsoft and Google are expected to spend a massive $725 billion on AI infrastructure investment this year alone.
This is the backdrop to the round of job cuts affecting the Irish tech sector, a worryingly new phase to what had already been happening.
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Employment in the sector had bounced strongly as the world economy emerged from Covid – job numbers in the Irish information and communications technology sector rose from 130,000 in 2019 to peak around 190,000 at the start of last year.
Much of the subsequent drop to 170,000 by the end of 2025 had been attributed to " right sizing” after the exuberant post-Covid hiring, with the need to divert investment to AI also in the frame.
Now, however, the AI factor is front and centre as a fresh round of redundancies hit the sector. There are two primary reasons.
One is the need to save money elsewhere to free up cash for ramped-up AI investment as companies make massive bets on these technologies. The other is the obvious one – the ability of AI to do jobs previously done by employees.
According to Meta chief executive Mark Zuckerberg this week: “We are seeing more and more examples where one or two people are building something in a week that would have previously taken dozens of people months.”
Meta is cutting its international workforce by 10 per cent, with clarity on what this will mean for its Irish arm expected later in May. As well as the 8,000 employees affected, the company has also said it will cease hiring plans for a further 6,000 positions.
Microsoft, which trimmed its global and Irish workforce last year, is offering 7 per cent of its US workforce early retirement.
Meanwhile Oracle, also making a big play in the AI area, is cutting 150 jobs here as part of a worldwide reduction, with reports that these will focus on areas where the company expects to use AI to perform tasks previously undertaken by employees.
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These follow other AI-linked redundancies in companies such as Amazon – where administrative staff are in the firing line – TikTok and smaller companies such as the fintech Block, which also established an Irish base.
Contractors, who are typically responsible for support services, are also affected. This week Irish company Covalen, which provides content moderation and other services to Meta, announced plans for 700 jobs cuts.
This disruption of the tech sector is part of the wider AI impact on the economy with a recent Economic and Social Institute (ESRI) report estimating that about 7 per cent of current jobs in Ireland could be displaced in the short to medium term by AI, with of course many more affected, either positively or negatively.
Recent work by the Department of Finance identified the tech and professional services sectors as among the most exposed to AI, and estimated that more than six out of 10 jobs in the wider economy would be affected by the technology – or were “relatively exposed”, as the department put it.
Already the impact is showing, with the most exposed sectors, including tech and finance, recording employment combined growth of 3 per cent between 2023 and 2025 compared with 5 to 6 per cent elsewhere in the economy.
Younger employees are taking the brunt of the pain – presumably due to lower hiring – with a sharp 30 per cent fall in 15- to 29-year-olds employed in the tech sector over the two years compared with a 7 per cent rise for 30- to 59-year-olds.
Not all of this can be attributed to AI, the department says, but it is in line with international evidence showing that younger employees are the most exposed.
And the continuing impact here, while difficult to estimate, is clearly going to be substantial. A report by Trinity College Dublin this week, sponsored by Microsoft, said AI could free up 1,000 hours a month in a typical mid-sized organisation in Ireland by reducing time spent on areas such as dealing with emails, routine administration and meetings.
For large multinationals, the total rises to 5,000 a month. The positive is that this can free people up for more meaningful work. The negative is that it means companies can get by with fewer people. A thousand hours represents about 25 full-time jobs.
And so the Irish tech sector faces a two-way stress test. One part of this will be determined by which companies emerge as the “winners” in this global race. The odds ebb and flow.
Meta’s shares fell after its announcement of its earnings on Wednesday and its rapidly ramped-up investment plans – amounting to $145 billion this year – together with an admission that it hasn’t been doing enough to date in this area.
Intel, for long shunned by investors, is back in favour on rising demand for its microchips based on AI. Investors debate what the revised terms of Microsoft’s agreement with OpenAI, announced this week, will mean.
As this massive transformation gathers pace, it matters to Ireland which companies emerge as winners. If AI helps a company to do things better and win new customers, those who do it best will be well-positioned, even if they may have to restructure along the way.
The other key question relates to the structure of the companies and the vulnerability of jobs here, which will depend in part on how central they are to the operations of the big companies. In the new area, support jobs, many more replaceable by AI, look vulnerable, even if some “tech” functions such as software development are also increasingly AI-driven.
“AI will enable companies to distil themselves down to their essence,” according to one senior executive with experience in a number of the big players. These typically centre on functions such as product design and engineering – and sales.
Operations functions looks more vulnerable than engineering. A worry for Ireland is that although some jobs here are involved in key functions, engineering is not seen as a particular strength in Ireland and many jobs are in what might be termed support functions. And so the scale of job losses here and, crucially, the kinds of jobs affected will be vital to watch in the months ahead.
This will give an indication of what exactly companies are up to, where money will continue to be saved and where new investment is going – and thus Ireland’s place in the shake up.
As Ireland is reliant on tech jobs and tech tax revenues, the outcome of the AI rise is critically important for the country. The State can control its own policy response, of course, in terms of investment, training, supports and the complex issue of regulation.
There are vital policy issues here to try to position Ireland as well as possible and assist the domestic as well as the foreign direct investment sector. But the State is a spectator to the wider AI race now raging and its unpredictable outcome, which will be vital to some of Ireland’s big employers and taxpayers.
Ireland has survived big restructuring of the tech sector in the past – but this time the scale of what is at stake looks different. It is another example of Ireland’s exposure to a few big US multinational players.
