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Alphabet Inc. Recently Laid off 12,000 Employees. Is it Enough?

According to TCI Fund Management, it is not. They state their disappointment in two infamous letters to Sundar Pichai.Alphabet Inc. Recently Laid off 12,000 Employees. Is it Enough?

Alphabet Inc. recently laid off 12,000 employees. Is it enough?

According to Christopher Hohn of TCI Fund Management, a British hedge fund, it is not.

He recently sent two infamous letters to Sundar Pichai, Alphabet Inc.'s CEO, stating his disappointment for the company's poor financial performance over the past year. Costs are growing at a faster pace than revenue, with salaries being a significant chunk of expenses.

I have no expertise to agree or disagree with Sir Chris Hohn, but I find the letters' content fascinating.

Despite a though market, Google added around 34k employees in 2022 alone. From around 156k to around 190k. It is impressive! Not only that, headcount has more than doubled since 2017. And if this wasn't enough, median salary was nearly 300k/year in 2021, 67% higher than at Microsoft. So, if you're a Googler who make 200k, beware you're in the lower half!

Number of Alphabet's full time employees over time

Median compensation at largest US tech companies

The letters also suggest an EBIT margin target for the Google Services segment of 40%. Spoiler alert, they didn't make it 😢

Google Services, consisting of advertising, YouTube subscriptions, Google Play and hardware sales, recorded an EBIT margin of "just" 34% in 2022 vs 39% in 2021. Search Ads is the largest contributor of this segment. So Mr. Hohn expected more from such a mature product with high margin potential.

Google Services EBIT margin target was missed in 2022

He also hints at the massive cash reserves that Alphabet Inc. holds on the balance sheet. $116 billions that should partially be used for share buybacks, to pump the stock price up. In fact, large-scale M&A is out of question due to strict regulatory scrutiny.


For a public company that doesn't distribute dividends, revenue and profit growth is the only mean to keep investors happy. They expect the stock price to keep growing even in challenging times. But as the market matures, growth has naturally slowed. So, after share buybacks and headcount reduction, what will come next?

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