In response to “a changing economic reality,” Google parent Alphabet Inc (GOOGL.O) announced in a staff message that it is eliminating around 12,000 jobs, doubling focus on artificial intelligence (AI), and firing employees who support experimental initiatives.
The layoffs at tech behemoths including Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O), and Meta Platforms Inc (META.O), who are shrinking after a pandemic-driven hiring spree left them flabby in a poor economy, affect 6% of their staff.
On Friday, Alphabet stock increased 4% after the Mountain View, California-based company announced a roughly third increase in personnel through 2020 and 2021. They had decreased 30% over the previous 12 months, mirroring a 24% decline in the larger tech sector.
Alphabet’s current CEO, Sundar Pichai, stated in the memo released on Friday that he accepted “full responsibility” for the decisions that resulted in the layoffs.
As Alphabet sought to infuse its products with more AI, Pichai, whose pay was recently more closely correlated with performance, said that this was an opportunity to “sharpen our focus, reengineer our cost base and direct our talent and capital to our highest priorities,” echoing remarks from Microsoft that announced job cuts on Wednesday.
Microsoft is apparently trying to increase its stake in ChatGPT, a promising chatbot that provides responses that are human-like, putting pressure on Alphabet, a longtime leader in AI.
“It is clear that Alphabet is not immune from the tough economic backdrop, with worries about a U.S. recession growing,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
“The expansion of advertising has stopped. Competition is also escalating, with Instagram competing for vital YouTube subscribers and Alphabet confronting a formidable opponent in TikTok “Streeter said that Alphabet had also accrued enormous fines from regulatory agencies.
Alphabet’s record-high headcount, according to Evercore ISIS analyst Mark Mahaney, had posed significant margin risk going into fiscal 2023, and according to Bernstein analyst Mark Shmulik, employee cuts may save the business $2.5 billion to $3 billion in expenses.