AI Layoffs Backfire: Gartner Finds Cutting Staff Doesn't Boost ROI

Companies racing to cut jobs in the name of AI efficiency have a problem: the data doesn't back them up. New research from Gartner, which surveyed 350 global businesses with revenue above $1 billion, found that 80% of companies cut staff as a result of AI and intelligent automation initiatives. But those layoffs had zero correlation with stronger ROI.

"Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced," said Helen Poitevin, distinguished VP analyst at Gartner and lead researcher on the study, as reported by The Register. "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."

The finding lands at a moment when tech layoffs are accelerating. Cognizant plans up to 15,000 cuts, Coinbase slashed 14% of its workforce, and Snap eliminated 1,000 jobs — all citing AI as a driving factor. According to Computerworld, some organizations cut headcount by as much as 20% after deploying AI tools.

Gartner found that organizations seeing real returns from AI aren't the ones slashing payroll. They're the ones investing in people. These companies focus on upskilling employees to use AI tools, linking hiring criteria to AI proficiency, and building systems where humans guide, manage, and scale autonomous technologies rather than being replaced by them.

"Those who only look to the workforce tend to be the 'laggards,' because they're not going after the broader set of value that they can get to," Poitevin told.² The broader value includes revenue growth, faster time to market, and new business models — none of which show up if you're just counting salary savings.

Fortune reported that HR leaders are increasingly alarmed by the trend. One Fortune 500 CHRO admitted: "We didn't have a lot of strategic intent when our layoffs were done." Another HR executive said there was "no doubt" that AI‑driven layoffs had damaged company culture.

The alternative to slash‑and‑replace is task‑level automation with employee redeployment. Jolen Anderson, Chief People and Community Officer at BetterUp, outlined a practical framework to:³ identify which specific tasks AI can automate, analyze what skills existing employees already have, and redeploy people into more human‑centered work.

Anderson shared a concrete example from BetterUp: AI was assigned to handle candidate interview scheduling. The employees who previously managed scheduling were moved into "candidate experience‑focused" roles, Fortune reported — partnering with hiring managers on in‑depth post‑interview feedback and sourcing higher‑quality candidates. "This is not an expense game, it's a value game," Anderson told.³ "This race to the bottom line is just not sustainable."

The message to executives is both ethical and practical: as ¹ put it, "you're not just being cruel, you're being strategically wrong."

One reason the layoff‑for‑ROI bet fails: AI agents simply aren't reliable enough yet. ¹ cited a Carnegie Mellon study finding that AI agents get office tasks wrong about 70% of the time. Many agent projects could collapse by the end of 2027 due to rising costs, unclear business value, and inadequate risk controls.

Researchers from Imperial College London and Microsoft have also warned that AI adoption can paradoxically increase workloads — workers end up supervising multiple agents, correcting errors, and doing "babysitting" work that replaces the original tasks rather than eliminating them.

Despite all this, Gartner expects spending on agentic AI software to soar from $86.4 billion in 2025 to $376.3 billion by 2027. The tension between poor current outcomes and aggressive market forecasts is exactly what makes the layoff strategy so risky — companies are betting big on technology that isn't proven yet, and cutting the people who could fill the gaps.

Gartner predicts the pendulum will swing back. By 2027, 50% of companies that attributed headcount reduction to AI will rehire staff to perform similar functions under different job titles, Gartner predicts. By 2029, AI‑created jobs are expected to outnumber jobs lost to automation, according to Computerworld.

"AI is not leading to a jobs apocalypse, but it's unleashing job chaos, changing the shape of what people do," Poitevin said. The comparison is to earlier tech shifts: spreadsheets didn't eliminate financial analysts — they created more of them. E‑commerce didn't kill logistics — it exploded demand for delivery drivers. AI will force many workers to "rethink what they do, how they do it, what 'good' looks like," Poitevin told.²

For builders, the implication is clear: the companies that will thrive are the ones using AI to amplify workers rather than replace them. If you're building AI tools, position them as augmentation, not replacement. If you're building a career, invest in the skills that sit between human judgment and AI execution — that's where the durable jobs will be.