Google parent Alphabet is focused on simplifying its organisational structure and removing management layers to improve efficiency and re-engineer its cost base, CEO Sundar Pichai said on January 30.
This move comes even as the tech giant continues to invest in realising its big artificial intelligence (AI) ambitions.
In the past month, Google has laid off over a thousand employees across various divisions including its hardware, ad sales, digital assistant and YouTube. More job cuts are anticipated throughout the year, Pichai reportedly told employees earlier in the month, although it won't be on the same scale as the 12,000 job cuts in 2023.
During the company's earnings conference call on January 30, Pichai said that teams at Alphabet are working to focus on key priorities and execute faster.
He cited the example of its devices team that has brought together different teams from across Nest, Fitbit and other teams into a new functional structure. "This will help us pull resources and drive progress across our Pixel portfolio. Across different teams, we have wound down some non-priority projects, which will help us invest and operate well in our growth areas" Pichai said.
Google is also improving its machine utilisation by leveraging its years of experience in driving cost efficiencies in its computing infrastructure and operations, Pichai said. He also mentioned that the company has achieved significant savings by making major improvements in areas such as procurement through its supplier efficiency efforts and automation of certain processes.
Alphabet president and chief investment officer Ruth Porat said its product prioritisation efforts, which ensure they have the right resources behind the company's most important opportunities and reallocate resources where the company can, has also contributed towards moderating its expense growth.
This has also resulted in a slower pace of hiring at the search giant that saw its headcount decline by 4 percent year-on-year to 182,502 employees at the end of 2023. That said, Porat however noted that the firm will continue to invest in top technical and engineering talent.
Read: Alphabet shares fall after search revenue misses estimates
Alphabet spent $2.1 billion on employee severance and other expenses in 2023 as it laid off more than 12,000 employees. During the call, Porat estimated the severance-related expense to be roughly $700 million in the first quarter of 2024.
AI investments to continue
Alphabet, which is locked in a battle for AI leadership with peers Microsoft, Meta and OpenAI, also saw its capital expenditure (CapEx) rise to $11 billion in Q4 2023 as the company ramped up spending on technical infrastructure, led by servers and data centers.
"The step-up in CapEx in Q4 reflects our outlook for the extraordinary applications of AI to deliver for users, advertisers, developers, cloud enterprise customers and governments globally and the long-term growth opportunities that it offers" Porat said.
Porat said the tech giant expects the CapEx to be "notably larger" in 2024 compared to last year.
"As we enter the Gemini era, the best is yet to come" Pichai said, referring to its new family of AI models that is expected to fuel the next generation of AI advancements.
Gemini is the first AI model from Alphabet after the merger of its AI research units, DeepMind and Google Brain, into a single division called Google DeepMind, led by DeepMind CEO Demis Hassabis.
Gemini has been built from the ground up and is "multimodal" in nature, meaning it can understand and work with different types of information, including text, code, audio, image and video, at the same time. It can also run on everything ranging from mobile devices to data centers.
"Gemini gives us a great foundation. It's already demonstrating state-of-the-art capabilities and it's only going to get better" Pichai said.
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