Alphabet cuts 12k jobs after Covid hiring spree

Google’s parent Alphabet Inc is cutting about 12,000 jobs as it faces “a different economic reality”, it said in a staff memo, doubling down on artificial intelligence.

The job cuts affect 6% of its workforce, and follow thousands of layoffs at tech giants, including Amazon, Microsoft and Meta, who are downsizing after a pandemic-led hiring spree left them flabby in a weak economy.

Shares in Alphabet, which boosted its workforce by nearly a third through 2020 and 2021, rose 4% on Friday. They had fallen 30% in the past 12 months, echoing a 24% slump in the broader tech industry.

Sundar Pichai, Alphabet’s boss since 2019, said in the memo on Friday that he took “full responsibility” for the decisions that led to the layoffs.

Mr Pichai, whose pay was recently tied more closely to performance, said this was a moment to “sharpen our focus, reengineer our cost base and direct our talent and capital to our highest priorities”, as Alphabet looked to get imbue its products with more AI.

Alphabet, long a leader in AI, is facing competition from Microsoft, which is reportedly looking to boost its stake in ChatGPT — a promising chatbot that answers queries with humanlike responses.

Ad dollars, Alphabet’s mainstay revenue source, meanwhile, are feeling the squeeze from businesses chopping budgets as consumers pull back spending.

“It is clear that Alphabet is not immune from the tough economic backdrop, with worries about a US recession growing,” said Susannah Streeter, an analyst at Hargreaves Lansdown.

“Ad growth has come off the boil ... Competition is also heating up, with Alphabet facing a powerful rival in TikTok, and Instagram also vying for its important YouTube viewers,” she said, noting that Alphabet has also racked up billions in regulatory fines.

Evercore ISIS analyst Mark Mahaney said Alphabet’s record-high headcount had created major margin risk going into fiscal 2023 and Bernstein analyst Mark Shmulik said the job cuts could save the company Alphabet US$2.5 billion to $3 billion in costs.

With Alphabet’s staff cuts, layoffs at four of the biggest US tech firms total 51,000 jobs in the past few months. They have fanned fears of a recession even as the US job market remains tight.

“The tech sector is bit like the proverbial canary in the coal mine,” said Stuart Cole, an economist at Equiti Capital, who believes the tech layoffs portend that the outlook for job security is finally beginning to turn more negative.

Apple, which hired more prudently through the pandemic, has held off on cuts so far.