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Sat. May 25th, 2024

The usual impression is that layoffs are about cost savings. In the short term, however, layoffs can result in huge costly expenses. Google has spent billions of dollars on layoffs last year and this year, a good testament to this situation.

In 2023, Google fired more than 12,000 employees and spent $2.1 billion on employee severance and other costs, according to its fourth-quarter and full-year 2023 earnings report released on 30 January by Google’s parent company, Alphabet; and in January 2024, the company paid out $700 million in severance in a single month to more than 1,000 of its most recent layoffs.

It’s also worth noting that the layoffs have cost Google a lot, as well as the loss of real estate assets disposed of as a result of the layoffs (including disposing of properties in places like the Bay Area, where prices are high). In total, Google lost $1.8 billion in office closures in 2023, according to the data.

Despite the ongoing job cuts, most of Google’s core businesses grew through the end of 2023. According to the earnings report, Google’s revenue for the fourth quarter of 2023 was $86 billion, up 13 per cent year-over-year. The company’s core digital advertising and cloud computing businesses also showed steady growth in revenue – revenue that Google CEO SundarPichai attributed to investments in generative AI.

Google’s Expensive Layoffs, $1.8 Billion in Real Estate Losses

The industry has often attributed the tech giant’s drastic restructuring of its staffing structure and numbers also to the growing maturity of AI – particularly generative AI – to replace many employee jobs.

In a conference call with investors, Pichai referred to 2024 as the “Gemini era” for Alphabet. He said: “Gemini is the vision we first realised when we founded GoogleDeepMind, thanks to the ingenuity and hard work of two world-class research teams at Alphabet and Google. We are about to launch GeminiUltra and apply it to our products.”

In addition to AI, Google is now the world’s third-largest cloud provider, behind Microsoft Azure and AWS.The performance of Google’s cloud division began to accelerate last year, including fourth-quarter revenues of $9.19 billion, up 25.6 per cent year-over-year. And cloud and AI, in today’s business environment have great synergies.

However, the search engine business is Google’s main source of revenue, with the division posting $48 billion in revenue in the fourth quarter of 2023, an increase of nearly 13 per cent year-over-year.

Undoubtedly, Google’s continued investment in AI means that the company will cut budgets in other divisions to compensate. So industry analysts think it’s safe to assume that Google will lay off even more employees in 2024.

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