News Analysis
White Paper
Why Enterprise AI Fails at Scale
It’s concerned employees since AI first hit the scene: the technology will take away their jobs. And according to some reports, that’s happening. Or is it?
Table of Contents
- Tech Giants Tie Job Cuts to AI Productivity
- Layoff Filings Show a Rise in AI Mentions
- Are Companies Overstating AI’s Role in Job Cuts?
- Why the Layoff Story Is More Complicated Than AI
- The Bigger Impact May Be in Hiring, Not Firing
- Fear Outpaces the Data on AI Job Loss
Tech Giants Tie Job Cuts to AI Productivity
Much of the current concern about AI-attributed layoffs comes from reports earlier this year from Challenger, Gray & Christmas, which were expanded on by other analysts.
According to Lisa Simon, chief economist for Revelio Labs, these AI layoffs include:
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WiseTech Global: The Australian logistics-software firm announced cuts of about 2,000 jobs — roughly one-third of its global workforce — as part of a two-year restructuring driven by its integration of AI into development and internal operations. The CEO stated AI tools have accelerated operations, enabling tasks automation that previously required humans.
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Hewlett Packard: HP’s leadership publicly connected its workforce reduction plans — as many as 4,000-6,000 jobs by 2028 — to AI-related productivity gains as the company embeds generative AI into its core business.
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Amazon: Amazon linked part of its corporate restructuring to investments in AI and efficiency gains from automation. CEO Andy Jassy mentioned over-hiring during the pandemic and AI-informed productivity improvements as drivers, particularly in corporate tech and management layers.
Layoff Filings Show a Rise in AI Mentions
Challenger reports say there’s no question companies are blaming AI. According to Andy Challenger, the company's chief revenue officer:
- Since 2023: Since AI was first tracked as a reason for layoffs, it's been cited in 79,449 announcements — 3% of all layoff plans between 2023-2026.
- In 2025: Companies referenced AI in 54,836 layoff plans — 5% of all cuts announced that year.
- In January 2026: Companies cited AI for 7,624 job cuts — 7% of total cuts for the month.
According to the company, they track job cut announcements using Worker Adjustment and Retraining Notification (WARN) reports, news items, SEC filings, quarterly conference calls, corporate press releases and some internal data.
“Reasons are determined using the language of the corporate announcement, so we specifically use what the companies are saying when they lay off workers," the company noted. "In some cases, news items get quotes from company officials about the layoffs, and that also informs our ‘reasons’ data.”
Related Article: The Efficiency Trap: How AI Layoffs Could Backfire
Are Companies Overstating AI’s Role in Job Cuts?
But some observers don’t agree.
“We are not seeing a direct connection between recent layoffs and increased AI adoption,” said Adam Pressman, US & Canada employee research & engagement leader for Mercer. “While organizations are increasingly integrating AI tools into their work processes, these tools are augmenting how the work is being done, not currently replacing humans.”
In fact, according to the company’s 2025 US Compensation Planning Survey, only 2% of research participants cited AI as a reason for reduced hiring and less than 10% said they plan to make headcount changes in the future related to AI.
That said, there have certainly been a lot of layoffs. If it’s not AI, what is it? “In a market economy, job cuts are rarely driven by a single factor,” said Fabian Stephany, departmental research lecturer at the Oxford Internet Institute, University of Oxford. “More often, they reflect a combination of strategic mismanagement, declining competitiveness and pressure on profitability. In that sense, layoffs are usually about economics first, and technology second.”
“Citing gains from AI automation is an easier rationalization than explaining a change in strategy and restructuring more broadly,” Simon agreed. For example, many of the Amazon layoffs were related to the closing of its Amazon Go supermarkets, she said.
Why the Layoff Story Is More Complicated Than AI
Challenger reports say how often companies are naming AI as a reason, not how many jobs AI is actually displacing, Simon explained. “The truth is always a mixed bag of things, and not every person gets laid off because of AI automation. In the same vein, there are certainly layoffs happening that are not publicly attributed to AI, where a share of employees is being made redundant because of AI automation efficiency gains.”
“These dynamics often interact: economic pressure creates the need to cut costs, and AI provides a compelling justification,” Stephany said.
Layoffs may also be a reaction to COVID hiring earlier in the decade. “Companies like Amazon, HP and Salesforce expanded very aggressively during the pandemic, particularly in 2021 and 2022,” Stephany noted. “Some of what we’re still seeing looks like a delayed correction of those hiring waves. While this explanation will fade over time, it still helps explain why some firms appear to be ‘overstaffed’ even now. Pandemic hiring was a structural shock, and we’re still seeing the aftershocks.”
Blaming layoffs on AI is also a humblebrag of sorts — if companies are laying off people due to AI, it must be because they’re so advanced and such skilled users of the technology.
“Framing layoffs as ‘AI-driven’ can make them sound inevitable — as if the technology made the decision — rather than the result of strategic choices,” said Stephany. “Companies can place painful decisions in a narrative of technological progress: ‘We’re not cutting jobs — we’re becoming future-ready.’ In that sense, AI helps legitimize layoffs by presenting them as a sign of innovation and competitiveness, rather than weakness.”
The Bigger Impact May Be in Hiring, Not Firing
But even AI supporters acknowledge the future may be different. For example, in late February, some stocks dropped precipitously based on a report from Citrini Research predicting a cratering in SaaS software due to AI — a stock drop that may itself presage more layoffs.
A less obvious example may be in hiring. Compared to peak post-pandemic levels, hires have dropped by roughly 1 million per month — meaning 10-12 million fewer hires over the course of a year.
“If we assume that 20% of that hiring shortfall reflects AI-driven productivity gains — which is already a fairly strong assumption — that would imply roughly 2 million ‘jobs that did not happen’ because firms could operate more efficiently," said Simon. That’s many more jobs than the number of layoffs plausibly attributable to AI, she said.
That’s because AI primarily raises productivity within existing teams. “When employees adopt AI tools and become more efficient, firms do not necessarily need to terminate workers. Instead, they can slow hiring, decline to backfill attrition or consolidate open roles," according to Simon.
Only when productivity gains are large and sustained — or when adoption is uneven across workers — does headcount reduction become necessary. "For now, the labor market data are much more consistent with this hiring-restraint channel than with widespread AI-driven layoffs.”
Related Article: The 13-Minute Reality: New Study Says AI Isn’t Boosting Productivity (Yet)
Fear Outpaces the Data on AI Job Loss
Even for the future, some see AI-related job losses as overblown. “I don’t expect widespread AI-driven layoffs,” Stephany said. “Our research suggests that automation effects will remain concentrated in routine work.”
That doesn’t change the fact that employees are concerned about AI. According to Pressman, more than half of employees worry AI and other new technologies will impact their job security. “As organizations move forward, clear communication, employee involvement and thoughtful change management will be critical to maintaining trust and addressing concerns about job security.”
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In fact, AI might even help some people get hired, said Stephany. “The value of AI skills is rising sharply. In the UK, workers with AI skills earn a wage premium of around 23% in our data.” Moreover, according to research the company performed with 1,700 recruiters in the United States, the United Kingdom and Germany, people with AI skills are significantly more likely to be invited to interviews.
As AI takes over repetitive tasks, human skills become more important, not less, added Stephany. “Teamwork, resilience and ethical judgment increasingly sit at the core of many roles.”