Google’s parent Alphabet Inc. (NASDAQ: GOOGL | GOOGL Price Prediction) posted impressive results in its most recently reported quarter. They were not enough. Alphabet is going through another wave of layoffs, mainly at the Google unit, which is its largest.
Google CEO Sundar Pichai sent a letter to some employees saying cuts were necessary to reach “ambitious goals.” He added, according to CNBC, “The reality is that to create the capacity for this investment, we have to make tough choices.” He was not clear what these goals are.
As Google has increased its attempts to be a leader in artificial intelligence, it has fallen behind Microsoft, the success of which is driven primarily by its relationship with OpenAI. Microsoft plans to add AI capacity to many of its products and services. (See which 25 American industries are booming.)
Alphabet has been accused of being in too many businesses, which include its Pixel line of hardware and its investment in autonomous car company Waymo. Critics argue that Alphabet is too far behind the competition in these technologies and that more investment is not valuable.
Alphabet remains an advertising-driven company. In its most recently reported quarter, Alphabet had revenue of $76.7 billion and net income of $19.7 billion. Google accounted for $52 billion, and ad-supported YouTube accounted for another $7 billion. Some investors have anxiety because it has not expanded aggressively into non-ad-related sectors.
It is hard to fault Alphabet’s stock market performance. A year ago, its stock price was $92. Today, it has risen to $142. That is an increase of 54%, compared to a gain for the S&P 500 of closer to 20%.
A good stock price is not enough. Alphabet thinks it spends too much money, so some employees must go.
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