Google's Alphabet to review every project after $6bn decline in profits
Headcount swelled by almost 37,000 in a year, now investors want CEO Pichai to show them the money
Google parent Alphabet is preparing to slog it out with rivals in a slowing economy by committing to evaluate every project being undertaken.
The warning from Alphabet and Google boss Sundar Pichai came in a conference call to discuss financials for calendar Q3, which at $69.1 billion in revenue and $13.9 billion in profit were below analyst estimates of $71 billion in turnover and $16.9 billion in profit.
One analyst listening to the briefing pointed out that Google has hired 51,000 new heads since the start of 2020, and asked if the return on investment was being analyzed.
"We've been clear that we are going to moderate our pace of hiring going into Q4 as well as 2023," responded Pichai. "We are constantly working to make sure everyone we've brought in is working on the most important things as a company… that's a lot of what sharpening our focus has been about."
According to the latest set of profit and loss accounts, Google has hired a staggering 36,751 people in a year as demand for its products and services swelled across a world still dealing with the pandemic.
"We are reviewing projects at all scales pretty granularly to make sure we have the right plans there, and based on that, the right resourcing and making course corrections. And this will be an ongoing thing. It is something we'll continue doing going into 2023 as well," Pichai added.
Let that sink in. Almost 37,000, even though Google began to slow hiring in July.
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By mid-summer, Pichai asked Google's workforce for ideas to improve efficiency amid concerns that "productivity as a whole is not where it needs to be for the headcount we have." Google launched Simplicity Sprint as the repository for fresh thinking from staff to move faster, eliminate waste, etc.
Fast forward to last month and talk from the big boss was about embarking on a drive to up productivity by 20 percent. He said the company was "slower" moving after all those hires, which isn't massively surprising.
Google is also trying to cut back on overheads, and told staff that only business-critical events should be attended to restrict travel budgets. Microsoft and others have also tightened their belt.
In the latest set of financial results, Google reported year-on-year revenue growth of 6 percent to $69.1 billion. Google Services grew 2.5 percent to $61.377 billion, with growth in Search offsetting declines in YouTube and Google Network. Google Cloud jumped to $6.895 billion from $4.99 billion.
Profit from operations plunged by 9 percent to $17.135 billion. Google Services made $19.781 billion versus $23.973 billion a year earlier, while Google Cloud posted an operating loss of $699 million compared to an operating loss of $644 million, and Other Bets reported a loss of $1.611 billion against a loss of $1.288 billion in Q3 2021. Corporate costs were $336 million.
Net profit was $13.91 billion compared to $18.93 billion a year earlier. ®