Alphabet’s Google Offers Buyouts to U.S. Staff Amid AI Push

Tech giant Alphabet (GOOGL) is offering buyouts to U.S. employees within some of its core teams. Google sent an internal memo yesterday informing staff about the buyouts, which apply to its Knowledge and Information (K&I), central engineering, marketing, research, and communications teams. Meanwhile, employees from DeepMind, Google Cloud, YouTube, and central ad sales are excluded from the buyout offer.

Google is focused on ramping up its artificial intelligence (AI) ambitions and seeks to reduce costs and avoid ugly layoffs through these measures. Alphabet has set a massive $75 billion capex budget for AI infrastructure this year. The buyouts come as a prelude to potential layoffs, as earlier experiences have shown that employees prefer being offered buyouts rather than being laid off instantly.

Google Tightens Return-to-Office Policy with Buyouts

Along with the buyouts, Google has also mandated that employees who live near the office return to a hybrid work model. A buyout is a Voluntary Exit Program (VEP) offered to certain employees, allowing them to choose whether or not to accept the offer. In its memo, Google said that employees who are excited about their work and feel energized and motivated are encouraged to continue working at the company. In contrast, those “having difficulty meeting the expectations of your role” could opt to take the package. Google is reportedly offering staff up to 14 weeks of severance, and the offer will be available through July 1.  

Notably, Google’s K&I team includes some of its most popular functions, including those of Search, Ads, and Commerce teams. The decision to cut staff within the K&I team could be related to Google’s loss in a landmark antitrust case alleging dominance in Search and Ad Tech. Google awaits the remedial decision in both cases, with one possible outcome being the divestiture of both units.

Google resorted to mass layoffs in 2023, cutting roughly 6% of its workforce. The company faced severe criticism for this step and has since decided to rely on VEPs or buyouts for future workforce reductions. Until now, Google has downsized staff in its Pixel, Chrome, Android, Assistant, HR, Finance, and Legal teams. It remains to be seen whether Google undertakes another round of layoffs from these teams in the future.

Is GOOGL Stock a Buy or Sell?

On TipRanks, GOOGL stock has a Strong Buy consensus rating based on 27 Buys and nine Hold ratings. Also, the average Alphabet price target of $198.50 implies 11.1% upside potential from current levels. Year-to-date, GOOGL stock has lost 5.4%.

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