The last year has been pretty wild for the software industy. As of April 2026, this year has had 33k job cuts (if you ask Challenger, Gray & Christmas, who supposedly have been providing layoff stats for quite a long time [1].) The common theme from the CEOs here is that AI is the main motivator (or enabler) of these layoffs.

If we take them at their word they are either

  1. At terminal velocity and cannot grow any faster with increased productivity.
  2. Could grow faster but are instead choosing increased margins at the cost of reducing productivity.

For 1, if in The Before Times the issue was “we want to grow faster but it’s hard to find the right people” then this is a non-issue with the LLM productivity boost. Presumably you already have the right people, and if you are truly seeing such an increase in output, why would you reduce that output by laying anyone off? Why would you not just use LLMs as the multiplier you are saying they are to get more done with the same people?

Now if it was the case that you are growing at the max speed your market or ROCE can sustain, then yes improved productivity would not increase earnings. In that case it would make sense to cut costs and have the same output, but again, then you are admitting you are unable to grow faster. For an entrenched interest maybe this is acceptable, but for any modern tech company with a valuation multiple dependent on a high-growth story, this is a death rattle.

For 2, if the issue was “we could grow faster but instead we choose the same pace at higher efficiency” there seem to be a few implications. Is more cash on deck and slower better than less cash and faster? Are you now a defensively positioned company?

Are you trying to fuel growth through big capital expenditures and need the cash? If so, does that mean you don’t have the ability to sell equity or issue debt instead? What does that say about the health of your company that you could only get the capital by reducing operational capacity?

The biggest question that should keep these leaders up at night: What if your competitors choose to keep everyone on board with the increased efficiency and outgrow you?

It seems like the simplest explanation for these layoffs is actually rather boring and predictable.

  1. The company is not doing well
  2. They hired too many people a few years ago
  3. They wanted an excuse to cover up 1 & 2 and thought the market would buy it.

Maybe 6 months ago this was a story that worked, but increasingly I’m seeing the market either yawn or punish.