Big Tech bows to the ways of Wall Street

Silicon Valley once saw tactics like layoffs and stock buybacks as the kind of shameless "short-termism" that killed innovation. Today, not so much.

The big picture: Large tech companies have axed tens of thousands of employees in recent months in an effort to boost profits, with some simultaneously unveiling plans to pour billions into stock buybacks — two textbook moves typically aimed at appeasing Wall Street.

• And instead of talking about the world-changing technologies of the future that won't pay off for years, their executives are suddenly fixated on productivity, cost control and profitability.

Case in point: On Thursday, Salesforce shares surged almost 12% — its biggest daily gain in more than two years — after it delivered better-than-expected results and said it would double its share buyback plan to $20 billion. (It announced a giant round of layoffs in January, cutting 10%, or 8,000 people.)

• Chief executive Marc Benioff told analysts on a call Wednesday, "You all know that we’ve never had an efficiency focus in the company before because we’ve had 24 incredible years where we’ve had to just grow, grow, grow."

Zoom out: Benioff isn't alone.

• In November, Facebook parent Meta Platforms announced its first-ever mass layoff, lopping its staff by 13%, or 11,000 workers. In January, it announced a plan to jack up its stock buybacks by 40%, to $40 billion. The stock exploded 23% higher after the announcement, which was pared with earnings results.
• Payment giant Paypal similarly shucked 7% of its workforce, not long after announcing plans to funnel $15 billion into buying its own shares.
• Even Tesla chief Elon Musk has mentioned the prospect of launching a buyback program.

Why it matters: The sudden turn to Wall Street orthodoxy marks a shift in corporate America's balance of power over the last decade.

Flashback: In the years after the financial crisis, Silicon Valley emerged as an economic and financial counterweight to Wall Street, which had just discredited itself by setting off a financial crisis and global recession.

• A slow recovery followed, during which the success of Apple, Google, Amazon and Facebook set off a wave of tech triumphalism.
• Then came a parade of startup "unicorns," fed by the flood of venture capital cash seeking to get in on the ground floor of the next big thing.
• The seemingly endless supply of dollars allowed many of those firms to delay their public offerings for years and gave them leverage over a Wall Street machine desperate for them to go public. They struck incredibly favorable deals for themselves — including super-powered voting shares for founders and stock offerings with limited shareholder voting rights.
• The message was clear: The old Wall Street rules didn't apply to them.

What changed: The easy money era ended, when the Fed started hiking interest rates in response to runaway inflation.

• That hammered tech stocks more than most and revealed at least some of the tech sector's success to have been the result of a decade of rock-bottom interest rate policies, rather than the inherent business genius of tech founders and executives.
• Last year, the tech-heavy Nasdaq composite dropped more than 33%. (Meta was down 64%; Tesla fell 65%; Salesforce dropped 48%.)
• Investors and Wall Street analysts felt empowered to start questioning some of tech's "long-term," capital-devouring bets that rarely seemed to pay off.
• And activist investors, smelling blood, have started buying up shares of tech giants previously impervious to calls for action to make share prices rise.

The bottom line: On conference calls with Wall Street analysts, many Silicon Valley executives now sound remarkably like any other corporate leader trying to stay on the Street's good side.

• "We've entered somewhat of a phase change ... we just grew so quickly for the first 18 years," Meta's Mark Zuckerberg said last month. "It's very hard to really crank on efficiency while you're growing that quickly ... we're in a different environment now."