Tech companies that have been successful for a long time are now scaling back.

• Despite slowing growth rates, Meta, Alphabet, and Amazon are being rewarded by investors for maintaining financial discipline.
• Both companies are indicating that they will have minimal headcount growth after cutting thousands of jobs last year.
• Daniel Flax, an analyst at Neuberger Berman, stated in an interview with CNBC's "Squawk Box" that they are continuing to invest for the future, playing offense, while also managing expenses in this challenging environment.

Wall Street's lesson of maturity is being learned by technology companies, resulting in shrinking.

Their shares surged on Friday after their fourth-quarter earnings reports, despite revenue estimates being exceeded. The captivating message for investors is their ability to generate profits with fewer resources.

Meta, the tech industry leader, has decided to pay a quarterly dividend of 50 cents per share and authorize an additional $50 billion stock repurchase plan, marking a shift from its previous practice of reinvesting excess cash into growth. This move comes after a year of layoffs and capital preservation.

According to Daniel Flax, an analyst at Neuberger Berman, these companies are successful because they can adapt and reinvent themselves. They continue to invest for the future, take risks, and manage expenses in this challenging economic climate.

Amazon has not been as aggressive in sending cash to shareholders, but the topic is being discussed. The company announced a $10 billion buyback program in 2022 and has not made any further announcements. During an earnings call on Thursday, Morgan Stanley analyst Brian Nowak inquired about plans for additional capital returns.

"I am thrilled to finally have that question asked of me," said finance chief Brian Olsavsky, who had not been asked that specific question in three years.

Olsavsky stated that the company engages in annual or more frequent debates and discussions on capital structure policies, but there is no announcement to make. He added, "We are pleased to have better liquidity at the end of 2023 and we will strive to maintain it."

The largest internet companies worldwide are now in a new phase, with growth slowed down. While they continue to search for top technical talent, particularly in AI, they are more mindful of their hiring. Adding staff in specific areas may require cutting back in others.

‘Playing to win’

Mark Zuckerberg, CEO of Meta, informed investors that the company's approach to AI is competitive and that it will continue to invest heavily in this area to create the most advanced clusters.

When asked about expanding headcount, Zuckerberg stated that new hires would be "relatively minimal compared to what we would have done historically," and he expressed a desire to "keep things lean."

Amazon teams are aiming to maintain their headcount or reduce it while increasing efficiency in their business operations, according to Olsavsky.

Silicon Valley experienced its busiest month for tech job cuts in January since March, with over 30,000 layoffs at 118 companies. Amazon, Microsoft, and Ubisoft added to their 2023 job cuts by eliminating more roles last month.

This week, the cloud software market experienced downsizing as announced it was cutting approximately 400 jobs, or 7% of its staff, and confirmed it was eliminating less than 2% of its workforce, which amounts to close to 150 positions. In response, announced a plan to cut 8% of jobs, or almost 125 positions based on the most recent headcount figures.

Evan Sohn, Recruiter.com's chairman, described the job market as "very confusing" due to the dramatic changes in market conditions, including soaring inflation, rising interest rates, and a shift away from risk-taking, following an extended bull market. In 2023, Meta, Amazon, and Alphabet all announced significant job cuts, with Meta letting go of over 20,000 employees, Amazon laying off more than 27,000 people, and Alphabet cutting over 12,000 positions.

The economy is experiencing a significant turnaround, with growth resuming at a healthy pace, inflation under control, and the Federal Reserve hinting at rate cuts this year. Despite the pandemic's impact, unemployment has remained stable at 3.7% in January, down from 6.4% three years ago when the economy was still recovering from lockdowns. Additionally, nonfarm payrolls expanded by 353,000 last month, as reported by the Labor Department's Bureau of Labor Statistics on Friday.

The tech industry is experiencing a surge, as Meta, Alphabet, and Microsoft are all close to their peak values.

But the downsizing in the industry continues.

According to Sohn, companies are still dealing with the aftermath of 2023, and there may be a shift in skills required to navigate the new world of 2024.

Tech companies are receiving rewards from Wall Street for better discipline and cash management, but there is a concern about their potential for significant growth. Besides the one company that had a successful 2023 due to high demand for its AI chips, none of the other major tech companies have been growing at their usual rates.

Although Meta's 25% growth in the fourth quarter was better than expected, it is important to note that the comparable number from the previous year was negatively impacted by a slowing digital advertising market and an iOS update that made it more difficult to target ads. Finance chief Susan Li emphasized to analysts on Thursday that as 2024 progresses, the company will experience "lapping periods of increasingly strong demand."

Analysts predict that Meta's growth rate will decrease to the low teens by the end of the year. Additionally, growth estimates for Amazon and Alphabet are also lower, indicating that calls for capital allocation measures may become more frequent.

Quilter Cheviot's technology analyst, Ben Barringer, stated on CNBC that Meta's decision to pay a dividend was a "symbolic moment."

Barringer stated that Mark Zuckerberg is demonstrating his desire to involve shareholders in his plans and is emphasizing that Meta has evolved into a mature, responsible enterprise.

— CNBC’s Annie Palmer contributed to this report

Meta's Q4 report indicates that it is effectively utilizing Nvidia's chips.