Alphabet, Google’s parent company, to lay off 12,000 employees

Google’s parent company, Alphabet, is reportedly planning to lay off about 12,000 employees, or about 6% of its workforce, the company said on Friday, marking another round of layoffs hitting the tech space.

In a staff memo, Sundar Pichai, Alphabet’s CEO, shared with Reuters that the company had rapidly expanded headcount in recent years “for a different economic reality than the one we face today.”

“I take full responsibility for the decisions that led us here.”

Sundar Pichai

The cut becomes the latest to happen in the big tech industry, days after Google’s rival, Microsoft said it would lay off 10,000 employees, representing about 5% of the total employee base of over 220,000.

According to the memo sent to Reuters, the Alphabet layoff is global, and the company has already emailed the affected employees. However, the cuts immediately apply to employees in the U.S., while the process will take longer in other countries due to local employment laws and practices.

Alphabet’s job cut affects teams across the company, including recruiting, some corporate functions, and some engineering and products teams.

Read also: Microsoft to lay off 10,000 employees before the end of 2023

After Alphabet, who next?

The layoff trend seems to have become a phenomenon that has come to stay in the tech ecosystem despite hopes that its sting would not bite into the new year.

Previously, companies that have laid off their employees have cited persistent inflationary rise, the macroeconomic environment, and the predicted recession as the major cause of the layoffs. Major enterprises have been forced to take decisive and cautionary steps to maintain costs and increase revenues.

Just like every other tech company that has terminated staff appointments over the last year, Microsoft also explained that its plans for 2023 are to align its cost structure with its revenue and customer demand.

According to Satya Nadella, the CEO of Microsoft, the company is looking to allocate its capital and talents to “areas of secular growth and long-term competitiveness for the company”. The company is also looking to change its hardware portfolio and the cost of lease consolidation as they create higher density across its workspaces.

However, some days ago, the U.S. annual inflation rate slowed for a sixth straight month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts. It follows a 7.1% reading in November.

Coupled with easing inflation (December’s CPI reading was down to 6.5% from June’s peak of 9.1%), the macro picture left investors optimistic that the Federal Reserve might slow its interest rate hikes.

The average interest rate on the most popular U.S. home loan dropped to its lowest level since September as more evidence inflation is past its peak sent Treasury yields lower, data from the Mortgage Bankers Association (MBA) showed on Wednesday.

And despite low venture funding which was possibly exacerbated due to Covid in 2020, interest rates have begun to rally down, giving investors the confidence to take on new loans and expand their businesses.

One of the clear signs that 2023 was going to be a year of recovery is the crypto market which has cautiously rallied in the first few weeks of the year. The climb has been steady since the beginning of the month when U.S. economic data indicated slowing wage growth and declining unemployment.

This then begs the question, why are big enterprises still forced to lay off their workers, despite promising forecasts? Is there much uncertainty despite these revealings?

Well, the news comes during a period of economic uncertainty as well as technological promise, in which Google and Microsoft have been investing in a burgeoning area of software known as generative artificial intelligence.

“I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI,” Pichai said in the note.