Google Announces 12,000 Job Cuts in 6% Reduction of Global Staff

Alphabet Inc., the parent company of Google, has announced that it will be cutting 12,000 jobs, which is more than 6% of its global workforce. This comes as the latest tech giant to retrench after years of abundant growth and hiring.

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In an email to employees on Friday, CEO Sundar Pichai said that the job cuts will be felt across the company and around the world. He acknowledged that the decisions that led to this point are his responsibility. Alphabet shares rose 1.8% in premarket trading in New York on Friday after the company announced it would spin off its Google business. The stock has fallen about 30% over the past year.

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Google has joined a host of other tech giants who have drastically scaled back operations amid a faltering global economy and soaring inflation. Meta Platforms Inc., Twitter Inc. and Amazon.com Inc. have all slashed their ranks. Thanks to a resilient search business, Google has been one of the longest tech holdouts. However, the company is dealing with a slowdown in digital advertising and its cloud-computing division continues to trail Amazon and Microsoft Corp.

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Pichai wrote in an email that these are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities.
He said that the company has a lot of potential with artificial intelligence, which is a key area of investment where Google is seeing a lot of competition recently.
Pichai said that Alphabet would be paying affected employees at least 16 weeks of severance and six months worth of health benefits in the US. He said that bonuses wouldn't be affected.

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In October, the company reported third-quarter earnings and revenue that missed analyst expectations. Profit declined 27% to $13.9 billion compared to the prior year. At the time, Pichai said Google would curb its expenses and Chief Financial Officer Ruth Porat said the number of new jobs would fall by more than half in the fourth quarter from the previous period.

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Google's reduction in headcount is in response to investor pressure to adopt a more aggressive strategy to curb spending. In November, TCI Fund Management Ltd. urged the internet search giant in an open letter to publicly set a target for profit margins, increase share buybacks and reduce losses in its portfolio of Other Bets, Alphabet's moonshot division.

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"The company has too many employees and the cost per employee is too high," said Chris Hohn, managing director of TCI. He noted that Alphabet's headcount had grown by 20% per year since 2017.

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Google has made a series of cost-cutting moves in recent months, including canceling the next generation of its Pixelbook laptop and permanently shuttering Stadia, its cloud gaming service. Earlier in January, Verily, a biotech unit of Alphabet, announced it was cutting 15% of its staff. Since 2017, the company has more than doubled its workforce. In the most recent quarter, the company's workforce reached 186,779. Many of those hires were for Google's cloud division. The company is trying to build a second sales line to supplement its ads business.

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The cloud unit at the company brought in $6.9 billion last quarter, but it is still estimated to be third in the market.
In recent years, Google has added thousands of employees to its hardware division with the acquisitions of HTC and Fitbit. This division is responsible for developing and manufacturing hardware products for the company, such as smartphones, smartwatches, and other wearable devices.

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The human-resources consulting firm Challenger, Gray & Christmas Inc. reports that the tech sector will see the most job cuts in 2022 — 97,171, up 649% from the previous year.