Insider Today: Google's costly job cuts

January 31, 2024 • 5 min read

Hello! It’s never too early to learn the value of a dollar. Check out this third-grade teacher who charges her students “rent” and lets them spend fake money on homework passes and other perks.

In today’s big story, we’re looking at highlights from two of the world’s biggest tech companies’ earnings reports, including how much layoffs cost for one of them.

What's on deck

Markets: Here are a few things to watch for at the Fed’s meeting today, according to a top economist.
Tech: Tech CEOs will testify before Congress today for a hearing on child safety.
Business: It’s the most wonderful time of the year at Chipotle: “burrito season.”

But first, a tale of two tech companies.

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The big story

The cost of cuts

There’s been plenty of speculation about what Google’s mass layoffs last year meant for its famous culture. But what about the impact on its bottom line?

The 2023 job cuts, which totaled some 12,000 in January alone and left employees shocked, cost Google $2.1 billion, Business Insider’s Sarah Jackson reports. Alphabet shared the number as part of its fourth-quarter earnings report on Tuesday.

The cutting costs don’t stop there. The tech giant also reported it expects to incur an additional $700 million in severance costs this quarter.

Google already laid off hundreds of employees this month, impacting everything from advertising to central engineering. And CEO Sundar Pichai reportedly told employees there will be more to come.

This year’s layoffs have led some Googlers to start fighting back amid what they believe is a destruction of the company’s culture.

Paying nearly $3 billion to lay off employees wasn’t the only sore spot on Google’s earnings report. The company’s revenue for its search business, its bread and butter, fell just short of Wall Street estimates.

Google’s revenue for the quarter ($86.3 billion) and fiscal year ($307.4 billion) showed year-over-year growth — 13% and 9%, respectively — and topped analysts’ estimates. But that wasn’t enough to soften the blow of Google’s core business not meeting expectations, as its share price dropped during after-hours trading.

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Adding salt to Google’s wound was Microsoft’s success last quarter due to its AI products.

The fellow tech giant posted $62 billion in revenue, an 18% increase. The growth was largely thanks to its big bets in AI paying off.

The earnings results validated the company’s strategy to move quicker than some of its peers during the early stages of the AI race. Meanwhile, rivals like Amazon and Google have scrambled to respond.

(Never one to be satisfied, shares of Microsoft dropped a bit in after-hours trading as investors were looking for even more AI-fueled growth, Bloomberg reported.)

Still, Microsoft’s big revenue growth shows the tech giant is on the right track as it looks to cement itself as the go-to destination for companies looking to leverage AI.

3 things in

Markets

🔔 Before the opening bell: Nasdaq-100 futures fall early Wednesday after Alphabet and Mircosoft reported earnings.

Hisham Ibrahim/Getty Images

1. A crash course in analyzing the Fed’s policy meeting. The central bank will hold its first meeting of the year, and Fed Chair Jerome Powell’s press conference could offer some important clues on where things are headed, former Fed economist Claudia Sahm said. In short, it’s not so much what Powell says as much as how he says it.

2. So today I’m gonna invest like it’s 1999. The booming stock market is looking awfully similar to the one that preceded the dot-com crash of the early 2000s, according to JPMorgan. From market composition to valuations, here are all the ways the two eras are eerily alike.

3. China’s economy is an absolute mess. The collapse of real-estate giant Evergrande is the latest blow to the country, which is also fighting deflation. A lack of foreign investment and a stock-market slump aren’t helping matters.

3 things in

Tech

X CEO Linda Yaccarino.Jerod Harris/Getty Images

1. Congress is set to grill some of the biggest names in tech today. Leaders from Meta, X, TikTok, and other tech companies will face questions over their platforms' efforts to protect children from sexual exploitation online. This will be X CEO Linda Yaccarino's first time testifying before lawmakers.

2. A judge struck down Elon Musk's $55 billion Tesla pay package. The judge sided with a shareholder who argued in a lawsuit that the Tesla CEO’s massive pay plan was "beyond the bounds of reasonable judgment."

3. Jack Dorsey's Block is the latest tech firm to lay off staffers. Dorsey told employees on Tuesday the fintech would be laying off a ”large number” of staffers. A person familiar with the company told BI the number was near 1,000.

3 things in

Business

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1. WTF is “burrito season”? Chipotle has pointed to the months between March and May — aka “burrito season” — as a time when business booms for the fast-casual Mexican chain. It’s even planning to hire thousands of people to help staff the surge in sales, leaving some to wonder: Is that really a thing?

2. The economy is roaring. So why do we keep hearing about layoffs? January marked a month of layoffs for employees at companies like The Los Angeles Times, UPS, and Microsoft, to name a few. But data from the Bureau of Labor Statistics show that the nation's layoffs and discharges rate has been steadily low, hovering at about 1%.

3. Amazon Prime membership is bouncing back in the US. While there appears to be more chatter about people canceling their Prime subscriptions, new data suggests that membership growth may have actually increased after a dip in 2022.