Alphabet (GOOGL) will cut its workforce by 12,000 people, equivalent to 8 per cent of the total headcount, joining the other tech giants by reversing years of constant hiring. In a message to employees, chief executive Sundar Pichai blamed the macro-economic situation, saying the company had been hiring “for a different economic reality”.
This announcement came a day after Microsoft (MSFT) also said it would be laying off 10,000 of its employees, or around 5 per cent of its staff. Both companies grew headcounts rapidly during the pandemic. Since 2018, Alphabet has grown by 60 per cent to over 150,000 employees while Microsoft’s rose around 40 per cent to over 200,000.
These layoffs have been less severe than at rivals Meta (US:META) and Amazon (US:AMZN). In part, this is because Meta and Amazon hired even more aggressively during the Covid-19 tech bull run. Both these companies more than doubled their headcounts in the same period before investors clamoured for tighter belts. Alphabet's administrative costs, which include salaries, went from $6.9bn (£5.6bn) in 2018 to $13.5bn in 2021.
Despite the decision to pull back on hiring, both Alphabet and Microsoft have recommitted to investing in AI technology. Pichai focused on the “substantial opportunity in front of us with AI across our products” in his redundancy announcement. Meanwhile, Microsoft is planning a further $10bn investment in OpenAI and has announced it will be making OpenAI's ChatGPT product available to its cloud computing customers.
Amazon, Meta and Alphabet are all vulnerable to worsening macro-economic conditions because of their heavy reliance on advertising revenue. Microsoft should be more resilient because of its focus on B2B software but has seen a slight slowdown in its high-growth cloud computing business in recent quarters.
