Tech Layoffs Reflect Worsening Outlook

But the future for companies that help customers address costly inefficiencies is promising

Stripe Inc. said Thursday it is laying off about 14% of its employees. The Stripe booth at the GeekWire Cloud Tech Summit in June 2018.

Photo: David Ryder/Bloomberg News

Layoffs at ride-sharing firm Lyft Inc. and payments company Stripe Inc., as well as a pause in hiring at Amazon.com Inc., reflect a darker outlook for tech.

Enterprise technology so far has been a relative bright spot within the sector. That may continue, but with a growing emphasis on companies and services that are considered crucial to running a business and can be monetized right away. 

The business case for adopting cloud computing and automation is fundamentally sound, said Sunil Kanchi, who serves as chief information officer and chief investment officer of UST, a privately held company in Aliso Viejo, Calif., that assists clients with digital transformation. UST operates internationally and has more than 30,000 employees.

“The changes that we will see going forward will be based purely on the economic drivers from the overall economy slowing down,” Mr. Kanchi said.

He expects customers to continue to invest in areas such as automation and so-called low code-no code software platforms that reduce the need for human programmers, who are in short supply. 

The metaverse, NFTs, and some aspects of cryptocurrency, or those technologies which don’t have immediate monetary value, will continue to fall out of favor, Mr. Kanchi said.

“The job cuts are only the start and the tip of the spear. Larger and more thoughtful companies are starting to understand that capital is fleeing investment in the stock market into ‘safer’ assets like bonds or treasuries as interest rates rise,” said Wesley Chan, an investor and former tech leader at Google who developed early Google projects including Google Analytics, Google Voice and Google Ventures. He is a co-founder of early stage investor FPV Ventures.

“The downturn has kind of started but it hasn’t hit bottom and will get bad, very quickly, likely sometime mid next year,” Mr. Chan said. He expects a decline in demand for marginal or luxury areas like crypto, grocery and food delivery services, “neobanks,” and high-end travel and beauty. 

Demand for business-critical services that feel like utilities, will fare better. The outlook for drug discovery and life sciences, cybersecurity, and companies that help customers address costly inefficiencies or unlock inventory in the manner of Uber Technologies Inc. or Airbnb Inc. also is promising, according to Mr. Chan. He predicts that “the new Google or Uber of 2023 and 2024 will come out of this downturn.”

Write to Steven Rosenbush at steven.rosenbush@wsj.com

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