Google’s parent Alphabet Inc is cutting about 12,000 jobs, or 6 percent 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 3 percent in pre-market trading.

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

Alphabet now faces a challenge from Microsoft Corp in a branch of tech that can, for instance, create virtually any content a user can think up and type in a text box.

Microsoft this week said recession worries were forcing it to shed 10,000 jobs, less than 5 percent of its workforce, and it would focus on imbuing its products with more AI going forward – a point Alphabet’s CEO Sundar Pichai echoed in the 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 early this year.

Susannah Streeter, an analyst with financial services firm Hargreaves Lansdown, said Alphabet’s advertising business, which underpins 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 it more than $1bn, it said earlier this week.

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.

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.

Cut costs, preserve margins

The tech industry has been forced to freeze hiring and cut jobs “as the clock has struck midnight on hyper growth and digital advertising headwinds are on the horizon,” Wedbush Securities analysts Dan Ives, Taz Koujalgi and John Katsingris wrote Friday.

Apart from Microsoft announcing 10,000 job cuts, or nearly 5 percent of its workforce earlier this week, Amazon said this month it is cutting 18,000 jobs, although that was a fraction of its 1.5 million strong workforce, while business software maker Salesforce was laying off about 8,000 employees, or 10 percent of the total. Last year, Facebook parent Meta announced it would shed 11,000 positions, or 13 percent of its workers. Elon Musk slashed jobs at Twitter after he acquired the social media company last year.

Those job cuts are hitting smaller players as well. UK-based cybersecurity firm Sophos laid off 450 employees, or 10 percent of its global workforce. Cryptocurrency trading platform Coinbase cut 20 percent of its workforce, about 950 jobs, in its second round of layoffs in less than a year.

“The stage is being set: tech names across the board are cutting costs to preserve margins and get leaner” in the current economic climate, the Wedbush analysts said.

aljazeera