Google parent to lay off 12,000 workers as AI focus intensifies

(Reuters) – Google’s parent Alphabet Inc (GOOGL.O) is cutting about 12,000 jobs, or 6% of its workforce, it said in a staff memo Friday, as the technology sector reels from layoffs and companies stake their futures on artificial intelligence (AI).

Alphabet’s shares were up nearly 4% in morning trade.

The cuts come at a delicate moment for the U.S. company, which has long been the leader in key areas of AI research.

Alphabet now faces a challenge from Microsoft Corp (MSFT.O) in a branch of tech that can, for instance, create virtually any content a user thinks up and types in a text box. Industry observers said so-called generative AI may test Google’s dominance in internet search after a Microsoft-backed startup, OpenAI, released a chatbot known as ChatGPT that can answer queries with human-like responses.

Microsoft this week said recession worries were forcing it, too, to shed 10,000 jobs, less than 5% of its workforce, but it would focus on imbuing its products with more AI going forward. Alphabet’s CEO Sundar Pichai echoed the sentiment in his layoff memo.

Alphabet faced “a different economic reality” from the past two years when it rapidly expanded headcount, decisions for which Pichai said he took “full responsibility.”

Pichai became Alphabet CEO in 2019.

Still, he said, Google was gearing up “to share some entirely new experiences for users, developers and businesses,” and the company has “a substantial opportunity in front of us with AI across our products.”

The company has been working on a major AI launch, two people familiar with the matter told Reuters. One of the sources said it would take place in the spring of this year. The New York Times also reported that Google planned to unveil more than 20 new products and a search engine including chatbot features.

Susannah Streeter, an analyst with Hargreaves Lansdown, said advertising, the key business underpinning Google’s search engine and YouTube, was not immune to economic turbulence.

“Ad growth has come off the boil, a sharp contrast from the busy days of the post-pandemic re-opening which saw a surge in consumer spending,” she said. The company faces competitive and regulatory threats as well, she said.

It was unclear if Alphabet would take a one-time financial charge related to the job cuts. Microsoft’s severance packages, lease consolidation and hardware-lineup changes will cost the company more than $1 billion, it said earlier this week.

More than 38,000 tech-industry workers have faced layoffs this year alone, after nearly 155,000 lost their jobs in 2022, tracking website Layoffs.fyi stated. Companies cutting thousands of workers have included Amazon.com Inc (AMZN.O), Meta Platforms Inc (META.O) and Salesforce Inc (CRM.N).

Alphabet’s layoffs followed a review of its people and priorities, leading to a workforce reduction hitting various geographies, Pichai said. Among those losing their jobs are recruiters, corporate staff and people working on engineering and product teams, he added.

In the United States, where Alphabet has already emailed affected employees, staff would receive severance and six months of healthcare as well as immigration support. Alphabet is based in Mountain View, California.

One person who said he worked on Google’s Chrome browser posted on Twitter that he had lost his job even as he stepped into a leadership position on a project.

Overseas, layoff notifications will take longer due to local employment laws and practices, Pichai said in the memo.

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