AI
AI layoffs backfire as cutting staff doesn't cut it, firms warned
Replacing meatbags with failure prone agents isn't the gold mine some CEOs hoped for
Bosses betting on AI to slash headcount and boost margins are discovering an uncomfortable truth: the strategy isn't working.
New research from Gartner lays out the problem in stark terms. The analyst firm surveyed 350 global businesses - all with annual revenues above $1 billion, all piloting or deploying intelligent automation - and found that around 80 percent had cut staff as a result.
The returns? Elusive. Companies that reduced their workforces were just as likely to see negative outcomes or marginal gains as they were to generate any meaningful return on investment (ROI).
The conclusion? Layoffs don't create returns, they just create vacancies.
"Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced," said distinguished VP analyst Helen Poitevin and lead researcher on the study. "Workforce reductions may create budget room, but they do not create return. Organizations that improve ROI are not those that eliminate the need for people, but those that amplify them," she added.
The organizations actually seeing results are doing the opposite of cutting, they're investing aggressively in new skills, new roles, and operating models built around humans guiding and scaling autonomous systems. The message to the slash-and-replace crowd is you're not just being cruel, you're being strategically wrong.
Gartner defines "autonomous business" as one powered by self-improving, adaptable technologies - agentic AI, robotics, advanced automation - designed, eventually, to run themselves. That future, we're told, is arriving faster than most firms are ready for, and those scrambling to get ahead of it by gutting their workforces are, according to this research, making themselves weaker.
If Reg readers are wondering where people fit into a completely automated business, don’t worry: Gartner says you won’t be going away - rather, it means “human-amplified business,” apparently.
That’s just as well, as an earlier study from Gartner found that AI agents get office tasks wrong about 70 percent of the time. It predicted many of these projects will collapse by the end of 2027 due to rising costs, murky business value, and inadequate risk controls
Despite these apparent failings, the analyst biz still expects agentic AI software spending to grow from $86.4 billion in 2025 to $206.5 billion this year and $376.3 billion in 2027.
Gartner's longer-term view is, oddly, optimistic. It forecasts that autonomous businesses will start creating jobs by 2028 or 2029, as new categories of work emerge that AI simply cannot do.
Researchers from Imperial College London and Microsoft earlier warned that AI adoption may paradoxically increase workplace burdens, as workers find themselves having to babysit multiple AI agents and correct their errors.
A separate report last month painted an even starker picture: AI isn't killing jobs outright, it's hollowing them out, steadily absorbing discrete tasks, narrowing roles, and compressing wages. Those whose work depends on judgment, context, and accountability may find a useful collaborator in AI. Everyone else may find themselves doing less, earning less, and wondering how it happened. ®
