Tech Layoffs Surge to 38,242 in May as AI Reshapes Labor Market, Hitting Two-Year High

US tech layoffs record single-highest month in two years, and more than any other sector -- nearly 40,000 get the axe, AI the most cited reason for layoffs

U.S. tech companies announced 38,242 job cuts in May, more than any other sector and the industry's heaviest month of reductions in nearly two years, according to data published Thursday by outplacement firm Challenger, Gray & Christmas. This monumental figure lifted the sector's 2026 running total to 123,653, up more than 65% on the same stretch of 2025, even as tech held the largest hiring plans of any industry and as the biggest firms raised their combined AI capital spending toward $725 billion for the year. AI was, of course, the most-cited reason for layoffs across every sector for the third month running. Employers across all industries announced about 97,000 cuts in May, up from 83,387 in April. Transportation ran a distant second to technology at 6,909, followed by services at 6,268. Meanwhile, U.S. employers have announced 80,472 planned hires in 2026 to date, with tech accounting for the largest share of any sector. Claims for unemployment insurance haven't risen in line with the layoff announcements, however, and the Labor Department's May payrolls report, due Friday, is expected to show 85,000 jobs added. "AI is now the leading reason companies give for cutting jobs," said Andy Challenger, chief revenue officer at Challenger, Gray & Christmas, in a statement. Several of the firms on this year's layoff lists are also the heaviest spenders on AI hardware. Google, Amazon, Microsoft, and Meta plan a combined $725 billion in capital spending in 2026, up 77% on last year, and Microsoft has attributed $25 billion of its own budget to rising memory and component prices. Meta CEO Mark Zuckerberg told staff that the company's roughly 8,000 job cuts were a direct consequence of its AI infrastructure spending. Roughly three-quarters of that hyperscaler capital outlay this year is tied to AI infrastructure such as servers, GPUs, and data centers rather than conventional cloud capacity. Whether AI is actually doing the work of the people being cut is an ongoing and unsettled debate. Challenger has ranked AI only the third-leading stated reason for layoffs in 2026, behind market conditions and restructuring, and the firm had logged the technology in more than 49,000 planned cuts through April. The firm has also said AI is so far claiming the budgets for those roles rather than the roles themselves. OpenAI's Sam Altman has accused some employers of "AI washing," leaning on the technology to justify reductions they would have made regardless, but flat jobless claims and Friday's expected payroll data gain leave the case for broad AI displacement unproven for now. Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.

Firms on AI spending spree: US tech companies cut most jobs in nearly 2 years

The tech sector said last month it planned to eliminate 38,242 positions, the most since August 2024, according to data from outplacement firm Challenger, Gray & Christmas. So far this year, the industry has announced 123,653 cuts, up more than 65% from the same period in 2025. US technology companies in May announced the most job cuts in nearly two years as they ramp up spending on AI. The tech sector said last month it planned to eliminate 38,242 positions, the most since August 2024, according to data from outplacement firm Challenger, Gray & Christmas. So far this year, the industry has announced 123,653 cuts, up more than 65% from the same period in 2025. Total private-sector job cut announcements, meanwhile, were down 7% over the past five months versus the same period a year earlier, reinforcing the picture of an ongoing "low-hire, low-fire" environment in most industries. The spy who hired me: Chinese agents hunt for secrets on LinkedIn "The labour market is being reshaped by technology in real time," said Andy Challenger, the company's chief revenue officer. "AI is now the leading reason companies give for cutting jobs." The figures jibe with recent high-profile, AI-related workforce reduction plans announced by companies including Meta Platforms Inc., Intuit Inc. and Cisco Systems Inc. Filings for unemployment insurance, however, haven't meaningfully increased despite the slew of layoff announcements, which have mostly been targeted at white-collar positions. Lufthansa Boeing 787-9 Dreamliner sinks onto its belly at Frankfurt Airport; Several injured While tech firms announced the most cuts, they also boasted the biggest hiring plans of any sector, according to the Challenger report. Across all sectors, US employers have announced 80,472 planned hires so far this year, the figures showed - better than in 2024 and 2025 but still well below totals for the same period in each year from 2019 to 2023. The government's monthly jobs report, due Friday, is expected to show employers added 85,000 jobs in May.

Job cuts in U.S: Lay offs total over 97,000 in May, highest in six years. Check what is disrupting jobs market

Lay offs in the U.S. continue to make headlines as job cuts in the country were estimated highest since 2020. Job cuts and lay offs in the U.S. totaled more than 97,000 in May. This has been the highest for month of May since 2020, according to findings by Challenger, Gray & Christmas. The survey claimed that artificial intelligence was the numero uno reason behind employees losing jobs three months in a row. Meanwhile, the Institute for Supply Management survey on Wednesday noted services sector employment remained subdued, with the ISM saying companies were reporting hiring freezes or were not backfilling vacated positions. The strength was at odds with the Beige Book report, which said "most districts described a low-hire, low-fire environment." It also noted "hiring remained selective and primarily ⁠focused on critical roles or attrition replacement." Job Cuts in U.S The U.S. job market has recently witnessed a significant increase in workforce reductions, particularly within the technology industry. According to a report released by Challenger, Gray & Christmas, U.S.-based employers announced 97,006 job cuts in May alone. This figure highlights the growing challenges many businesses are facing amid economic uncertainty, changing market demands, and evolving business strategies. Among all industries, the technology sector remained the leading contributor to job reductions. In May, technology companies announced 38,242 layoffs, accounting for a substantial share of the total job cuts reported during the month. These layoffs reflect the pressures faced by many tech firms as they adapt to shifting economic conditions, increased competition, and rapid technological advancements. The trend becomes even more concerning when viewed over a longer period. Since the beginning of the year, technology companies have announced 123,653 job cuts. This represents a dramatic increase of 66 per cent compared to the same period in 2025. Such a sharp rise suggests that the sector is undergoing a major transformation, with companies reassessing their workforce requirements and operational priorities. Several factors may be contributing to these layoffs. Businesses are increasingly focusing on cost reduction, efficiency improvements, and the integration of emerging technologies such as artificial intelligence and automation. While these innovations can improve productivity, they may also reduce the demand for certain roles, leading to workforce restructuring. The growing number of layoffs serves as a reminder that even industries known for innovation and growth are not immune to economic challenges. As companies continue to adjust their strategies, employees may need to enhance their skills and remain adaptable to changing workplace demands. The future of the job market will likely depend on how organizations balance technological progress with workforce development and employment stability.

Tech Layoffs Hit 2-Year High as Companies Embrace AI | PYMNTS.com

For the third consecutive month, artificial intelligence was the main reason cited by employers for these layoffs, outplacement firm Challenger, Gray and Christmas (CGC) said in a report issued Thursday (June 4). "The labor market is being reshaped by technology in real time," Andy Challenger, labor and workplace expert and chief revenue officer at CGC, said in the report. "AI is now the leading reason companies give for cutting jobs, and the primary industry citing it is technology. Technology, already the year's biggest job cutter, saw its steepest month of cuts since early 2023, even as it remains the sector with the most hiring plans this year." So far this year, U.S. tech companies have announced 123,653 cuts, a 66% increase compared to the same period in 2025. The sector is the top source of layoffs this year "by a wide margin," according to the report. In all, U.S. companies announced 97,006 job cuts in May, up 16% from 83,387 job cuts in April, and up 3% from the 93,816 announced in May 2025. It was the highest month for layoffs since May 2020, when companies cut 397,016 jobs at the height of the COVID-19 pandemic, the report said. Employers have announced 397,755 cuts so far this year, a 43% drop compared to the first five months of last year. However, the decrease is due to the sweeping government job cuts in the early days of the second President Donald Trump administration, according to the report. "On top of the headline AI story, we're seeing a sharp rise in cuts tied to acquisitions and mergers and a jump in bankruptcy-related losses, which tells me companies are restructuring aggressively as they reposition for an AI-driven economy," Challenger said in the report. Among the companies announcing AI-related layoffs last month were Meta (8,000 jobs), Intuit (around 3,000 jobs) and Groupon (400 jobs). PYMNTS examined the trend in April after a series of layoffs in the FinTech space, reporting that AI is "already altering staffing requirements." AI tools can write code, automate documentation, examine risk signals and manage client interactions, reducing the need for large teams in some functions. For all PYMNTS AI coverage, subscribe to the daily AI Newsletter.