Google’s parent company Alphabet has announced it is cutting 12,000 of its staff as it becomes the latest tech giant to scale down after years of extensive growth and mass hiring.
The layoffs represent more than 6% of the tech behemoth’s global workforce and will affect staff in all regions and departments, with particular losses in recruitment and engineering.
Google and Alphabet CEO Sundar Pichai said he took “full responsibility” for the decision, blaming the layoffs on overhiring during “periods of dramatic growth” that represent “a different economic reality than the one we face today,” in a letter to employees.
Google joins a host of other Big Tech companies forced to scale back operations following years of growth brought on by a pandemic-era, heightened demand for digital technology.
Just last week, Microsoft announced it would be slashing 10,000 jobs in a bid to shift funds for its ChatGPT investment.
Meanwhile, Twitter, Meta and Amazon have each announced cuts of over 10,000 staff respectively since the end of November last year. Apple remains the only one of the big five tech companies yet to announce layoffs.
“These are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities,” Mr Pichai told axed Google employees in the email.
Alphabet announced severance packages for all of its US employees, who will each receive at least 16 weeks of salary, their 2020 bonus, paid vacations and 6 months of health insurance. It is not yet clear how many staff in Asia and Europe will be affected by the cuts.
Unsustainable ‘Hypergrowth’
Google’s reduction in headcount arrives after multiple investors reportedly urged the tech giant to adopt a more aggressive strategy to curb spending costs at the end of last year.
In October, the company reported earnings much lower than analyst predictions for its third quarter. Profits declined by 27 per cent to $13.9 billion compared to the year before, with weaker-expected revenue.
These losses forced the tech giant to cancel the next generation of its Pixelbook laptop and permanently shut down Stadia, its cloud-based gaming service. Verily, a biotech unit of Alphabet was also forced to cut 15 per cent of its staff earlier in January.
Dan Ives, Analyst at Wedbush explained that Google’s layoffs demonstrate the irresponsible spending across a tech sector basking in “hypergrowth.”
"The reality is tech stalwarts over-hired at a pace that was unsustainable and now darker macro is forcing these layoffs across the tech space," he explained.
Google’s staff count increased by nearly 16 per cent in 2021 to 156,500 full-time employees compared to 135,301 employees in 2020 as it adjusted to demand brought on by the pandemic and increased funding for its cloud computing services.
New Challengers
Google’s Alphabet branch, a long leader in AI, has faced tough competition in recent months as other tech companies take advantage of recent advancements in generative AI.
Microsoft recently added a $10 billion investment into OpenAI’s ChatGPT project in a bid to take control of generative AI search and break Google’s long-standing chokehold on the search market.
To read more about ChatGPT, visit our dedicated AI in the Enterprise Page.
Meanwhile, advertising income, Alphabet's main source of income, has faced huge losses in recent months as businesses chop budgets amid macroeconomic headwinds and the rise of new ad rivals.
"It is clear that Alphabet is not immune from the tough economic backdrop, with worries about a U.S. recession growing," Susannah Streeter, an analyst at Hargreaves Lansdown told Reuters.
“Competition is also heating up, with Alphabet facing a powerful rival in TikTok, and Instagram also vying for its important YouTube viewers," Streeter explained, adding that Alphabet has also racked up billions in regulatory fines.
Social Media Outcry
Following the announcement of the layoffs, many Google employees took to social media to announce their departure from the tech giant and comment on the method used by Google to inform them of their redundancy.
Many employees said they were given no warning of the layoffs with many only finding out they had been removed from their positions when they attempted to log into their staff computers and were denied access.
@__kimberlydiaz Replying to @pinkyalfieandvicky story time of how i got let go while on a client visit… part one #googlelayoffs #layoffs #techlayoffs #bigtech ♬ original sound - Kimberly Díaz
The Alphabet Workers Union said in a statement that although the company’s leadership has taken "full responsibility" for the layoffs, it was "little comfort,” calling the behaviour: "unacceptable for a company that made $17B in profits last quarter alone.”
While Alphabet leadership claims "full responsibility," that is little comfort for the 12,000 workers who are now without jobs. This is unacceptable behavior for a company that made $17B in profits last quarter alone.https://t.co/bIsvMjKp6h
— Alphabet Workers Union (AWU-CWA) (@AlphabetWorkers) January 20, 2023
"It's appalling that our jobs are first on the chopping block so shareholders can see a few more points in a chart next quarter," the union added in a statement.
