AI begins to reshape the IT job landscape as layoffs rise

During the COVID-19 pandemic, Amazon was one of many tech companies that rapidly ramped up hiring to meet demand in a new, locked-down business paradigm. Other organizations, seeking to support all-remote workforces, followed suit, as tech hiring — and salaries — reached unprecedented heights.

But the boom didn’t last long, as Amazon along with Google, Meta, Microsoft, and other prominent enterprises collectively laid off more than 100,000 employees in 2022 to re-adjust to a world emerging from the pandemic. Now, just three years later, AI has risen to become another massive disruptor for tech employment, with organizations increasingly announcing workforce cuts to make room for AI talent and investments.

According to PwC’s 2025 Global AI Jobs Barometer, 100% of industries are increasing AI usage, and wages in the most AI-exposed industries are rising twice as fast as the least exposed. As a result, demand is spiking for AI skills — skills that are evolving 66% faster than non-AI skills, which is 2.5 times faster than just last year.

As the industry experiences this seismic shift, worker anxieties are rising. Many IT pros see AI making their skills obsolete and most believe their employers are failing to provide adequate training on AI for them to be successful in the years ahead.

Recent AI-related layoff announcements only add fuel to their concern. But some industry observers believe workforce readjustments are to be expected as the industry settles into long-term AI strategies — in some cases learning from their layoff mistakes along the way.

A sea change for IT

Amazon CEO Andy Jassy this month announced the company plans to reduce its overall workforce as more tasks are automated by AI. The company already uses robots in its fulfillment centers, as well as AI to oversee certain operations such as inventory and demand forecasting, and the announcement is just the latest in a string of high-profile companies citing AI as a reason for workforce reductions.

In Amazon’s case, the plan is to keep the workforce leaner, but other companies are reducing headcount to make space for new talent skilled with AI. For instance, in February Meta announced over 3,600 layoffs to make space for the talent needed for the organization’s AI plans. CEO Mark Zuckerberg announced that these cuts would enable Meta to shift spending priorities to AI development as well as hiring new, “stronger” talent. 

Other notable layoffs include Salesforce cutting 1,000 jobs to make room for AI roles, Dell cutting 2,500 jobs to shift to AI-powered infrastructure, and Intel cutting 15,000 jobs to pivot to AI-driven computing and semiconductor advances.

Companies from nearly every sector have been looking for ways to fuel AI strategies, in some cases selling off non-core assets to increase AI investment. Meanwhile, company boards are also beginning to push CEOs to replace workers with AI, including IT roles.

CIO.com’s State of the CIO survey recently found that 53% of IT leaders see AI replacing headcount in the near future, and while many industry observers still believe AI will augment human work, layoff announcements in favor of AI use are increasing.

In May, Microsoft announced 2,000 layoffs, with 40% of the impacted workers being software engineers. CEO Satya Nadella stated at the time that AI is responsible for writing up to 30% of the code on certain Microsoft projects, and CTO Kevin Scott believes that could reach 95% by 2030.

However, Chris Daden, CTO of Criteria Corp., says that Microsoft’s layoffs point to a trend of large tech firms “reshaping their workforces around AI priorities, not wiping out software careers.” Daden suggests that tech pros should stay “alert rather than alarmed,” as “routine coding and middle-layer project work will keep shrinking,” but there will be an increased demand for “engineers who can architect, integrate, and evaluate AI systems.”

Many experts agree, pointing to these layoffs as a shift in the market as organizations prepare for AI, with a predicted rebound as companies identify what skills they need to hire for to future-proof their organizations.

Gartner analyst Nate Suda sees such cuts as a “talent remix” to bring companies toward AI-adjacent revenue streams. He notes that, while a “smaller support base is never ideal,” the focus for companies right now is on building a “larger AI-revenue go-to-market team.”

“In short, 2025’s AI-driven layoffs are best read as portfolio re-allocations of human capital: shedding roles whose economic value has fallen below the AI line, while doubling-down on new roles that monetize the very same technology,” Suda says.

A skills-based shift for job seekers

One significant change that is occurring is how companies determine whether a candidate is a strong fit for open roles.

Companies are becoming more focused on hiring for skills, rather than “traditional credentials,” says George Denlinger, operational president of technology talent solutions at Robert Half. Technology is developing so rapidly, that traditional degree programs often can’t keep up, and even traditional job titles are losing weight as skills shift. Companies need flexible tech professionals who are motivated to learn new skills as they emerge.

And as AI use becomes increasingly common in the workplace, there will be more demand for “human skills like critical thinking, communication, and collaboration,” says Denlinger. AI will replace and automate certain aspects of IT jobs, but it will also create a demand for new roles to manage AI integration, he adds. There will always be certain aspects of work that AI cannot replicate, and humans will need to be involved in the process.

“No matter how advanced AI becomes, businesses still need professionals who can apply technology strategically and work effectively across teams,” Denlinger says.

New technical skills with high demand include prompt engineering, machine learning, data analysis and visualization, computer vision, and natural language processing (NLP). IT professionals looking to stand out in the new job landscape will need to identify, develop, and demonstrate the mix of AI and critical thinking and communication skills relevant to their specific role moving forward.

Companies express early regrets on AI-related layoffs

Early research shows that some companies already regret AI-based workforce cuts. A survey of 1,000 C-suite and senior decision-makers at medium and large organizations conducted by Orgvue found that 55% of respondents admit they made wrong decisions about making employees redundant when bringing AI into the workforce.

By cutting staff rapidly, organizations risk losing skilled employees with valuable institutional knowledge who would be willing to learn new AI skills. Moreover, 25% of business leaders admit they don’t know which roles will benefit most from AI, and 30% say they weren’t clear on what roles were at most risk from automation.

However, business leaders appear to be learning quickly from their early mistakes, as 80% say they now have plans to reskill employees to use AI effectively, with 41% increasing learning and development budgets to enable this training.

Maintaining human capital will be vital to successful AI deployment, industry observers contend. Rather than cut whole cloth in order to seek AI skills outside the organization, organizations that invest in training current employees can help alleviate some of the stressors of AI adoption.

“Technology may evolve rapidly, but it is people who bring context, judgment, empathy, and direction. Keeping human resources at the center of this transformation is not just important — it is essential to building a workforce that thrives alongside AI and drives meaningful, lasting outcomes,” Criteria’s Daden says.