Rebound in profits at tech firms eases fears of further job cuts

Sector poised for a phase of expansion in Ireland

Grit Young, partner at EY Ireland

Jon Ihle

The surprise rebound in the profits of the world’s biggest technology companies may have quelled the threat of further job cuts in the sector and could mean more growth for their Irish operations.

Strong quarterly earnings from Meta, Alphabet, Microsoft and Amazon sparked a stock market rally last week as the industry appeared to bounce back from a post-Covid growth scare.

Now big tech looks poised for a new phase of expansion in Ireland, where 16 of the 20 biggest technology firms have significant footprints.

“Tech companies have always been growth stocks and now investors are giving them the green light,” said Grit Young, valuations partner at EY Ireland. “The investment in talent will continue. It makes sense to consolidate your workforce in Ireland.”

The tech sector in Ireland lost thousands of jobs in the last year as companies, spurred by higher interest rates and falling share prices, looked to cut costs globally.

But the period of retrenchment seems to be ending as the sector focuses more on organic growth and less on big acquisitions or flagship projects like the “metaverse”.

“We saw tech stocks tumbling from record highs because the expectation was that income would be hit by the end of the pandemic, but nowadays tech is very diversified,” said Ms Young.

She said while it was clear that the war in Ukraine would affect advertising income and the pandemic growth in e-commerce would become more challenged, other areas in tech were growing strongly.

“A lot of big tech companies have cloud businesses,” Ms Young said. “These are driven by companies being more efficient, which is important in times of uncertainty. And advertising and e-commerce are still important, because when things are macroeconomically challenging, you still need customers.”

She said Ireland was well-positioned to benefit from the shifts away from “moonshots”, as tightening regulation of the sector meant that companies will be looking to grow from established bases.

“The scrutiny means you have to try to preserve your competitive advantage,” she said. “It makes sense to consolidate your workforce. Obviously, there are cheaper locations than Ireland, but high cost is not necessarily a bad thing. If you have the EU headquarters, it’s not the low-cost jobs that you need.”