Google employees question execs over ‘decline in morale’ after blowout earnings
Google’s business is growing at its fastest rate in two years, and a blowout earnings report in April sparked the biggest rally in Alphabet shares since 2015, pushing the company’s market cap past $2 trillion.
But at an all-hands meeting last week with CEO Sundar Pichai and CFO Ruth Porat, employees were more focused on why that performance isn’t translating into higher pay, and how long the company’s cost-cutting measures are going to be in place.
“We’ve noticed a significant decline in morale, increased distrust and a disconnect between leadership and the workforce,” a comment posted on an internal forum ahead of the meeting read. “How does leadership plan to address these concerns and regain the trust, morale and cohesion that have been foundational to our company’s success?”
Google is using artificial intelligence to summarize employee comments and questions for the forum.
Alphabet’s top leadership has been on the defensive for the past few years, as vocal staffers have railed about post-pandemic return-to-office mandates, the company’s cloud contracts with the military, fewer perks and an extended stretch of layoffs — totaling more than 12,000 last year — along with other cost cuts that began when the economy turned in 2022.
Employees have also complained about a lack of trust and demands that they work on tighter deadlines with fewer resources and diminished opportunities for internal advancement.
The internal strife continues despite Alphabet’s better-than-expected first-quarter earnings report, in which the company also announced its first dividend as well as a $70 billion buyback.
“Despite the company’s stellar performance and record earnings, many Googlers have not received meaningful compensation increases” a top-rated employee question read. “When will employee compensation fairly reflect the company’s success and is there a conscious decision to keep wages lower due to a cooling employment market?”
Another highly-rated comment centered around the company’s priorities, including its hefty investments in artificial intelligence.
“To many people, there’s a clear disconnect between spending billions on stock buybacks and dividends and re-investing in AI and retraining critical Googlers,” the post said.
Ruth Porat, Alphabet’s chief financial officer, appears on a panel session at the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Hollie Adams | Bloomberg | Getty Images
“Our priority is to invest in growth,” Porat said, as she took the microphone to respond to questions. “Revenue should be growing faster than expenses.”
She also took the rare step of admitting to leadership’s mistakes in its prior handling of investments.
“The problem is a couple of years ago — two years ago, to be precise — we actually got that upside down and expenses started growing faster than revenues,” said Porat, who announced nearly a year ago that she would be stepping down from the CFO position but hasn’t yet vacated the office. “The problem with that is it’s not sustainable.”
Google executives have been hammering this theme of late.
Search boss Prabhakar Raghavan, in an internal meeting last month, pointed to Google’s core business challenges, saying “things are not like they were 15 to 20 years ago,” and urged employees to work faster. He told his team, “It’s not like life is going to be hunky-dory, forever.”
Google’s cloud business was among units instructing employees to move within shorter timelines even though they had fewer resources after cost cuts.
Google’s use of cash
There were a lot of employee questions ahead of last week’s meeting directed at the company’s buyback, Porat said.
As of last quarter, Alphabet had more than $100 billion in cash on the balance sheet but, Porat said, “you can’t just drain it” or the company would find itself in the same position as in 2022.
By contrast, distributing cash to shareholders is not considered an expense on the balance sheet, she said, adding that the board has a fiduciary duty to consider such measures. Buybacks and dividends don’t replace investments in AI, Porat said.
Pichai chimed in when Porat wrapped up her response.
“I think you almost set the record for the longest TGIF answer,” he said. Google all-hands meetings were originally called TGIFs because they took place on Fridays, but now they can occur on other days of the week.
Pichai then joked that leadership should hold a “Finance 101” Ted Talk for employees.
With respect to the decline in morale brought up by employees, Pichai said “leadership has a lot of responsibility here, adding that “it’s an iterative process.”
Pichai said the company staffed up too much during the Covid pandemic.
“We hired a lot of employees and from there, we have had course correction,” Pichai said.
Alphabet’s full-time headcount climbed to over 190,000 at the end of 2022, up almost 22% from a year earlier and 40% higher than at the close of 2020.
Pichai, who replaced Google co-founder Larry Page as CEO of Alphabet in 2019, has taken his share of criticism of late for his messaging to the workforce as well as his lofty pay package, which swelled to $226 million, including stock awards, in 2022.
The package in 2022 included $218 million in equities through a triennial stock grant. His total pay in 2023 was $8.8 million, up from about $8 million the prior year (excluding the stock grant), according to Alphabet’s proxy filing. Other than Pichai’s $2 million salary for each year, most of his additional compensation was for personal security.
Employees have complained about the level of Pichai’s compensation at a time when the company is downsizing.
“Given the recent headcount and positive earnings, what is the company’s headcount strategy?” one question read. Another asked, “Given the strong results, are we done with cost-cutting?”
Pichai said the company is “working through a long period of transition as a company” which includes cutting expenses and “driving efficiencies.” Regarding the latter point, he said, “We want to do this forever.”
“To be clear, we’re growing our expenses as a company this year, but we’re moderating our pace of growth” Pichai said. “We see opportunities where we can re-allocate people and get things done.”
A Google spokesperson reiterated to CNBC that the company is investing in its biggest priorities and will continue to hire in those areas.
The spokesperson also said most employees will receive a pay raise this year, including an increased salary, equity grants and a bonus. Executives at the all-hands meeting said that staffers who received raises last year got smaller raises than usual.
Another comment floated ahead of the meeting was tied to “growing concerns about jobs moving from the U.S. to lower-cost locations.” CNBC reported last week that Google is laying off at least 200 employees from its “Core” organization, which includes key teams and engineering talent.
Executives were asked about the ongoing layoffs, despite the strong earnings report, and “when can we expect an end to the uncertainty and disruption that layoffs create?”
Pichai said the company will have worked through the majority of layoffs in the first half of 2024.
“Assuming current conditions, the second half of the year will be much smaller in scale,” Pichai said, referring to job cuts. He said it will continue to be “very, very disciplined about managing headcount growth throughout the year.”
That means the company is still making tough choices regarding investments in new projects.
“There’s a lot of demand to do new things and, in the past, we would have just done it reflexively by growing headcount,” Pichai said. “We can’t do it now through the transition we are in.”
WATCH: Alphabet’s investor call had a ‘remarkable’ level of transparency, says Jim Cramer
Technology
Google investors have big expectations after stock’s sharpest quarterly rally in 20 years
Google CEO Sundar Pichai waves as he arrives to attend the Artificial Intelligence (AI) Action Summit at the Grand Palais in Paris, France, February 11, 2025.
Benoit Tessier | Reuters
Alphabet has a high bar to clear when it reports earnings Wednesday.
The company’s stock price soared 38% in the third quarter, its best quarterly performance in two decades. It’s continued to rally, climbing 11% so far in October, closing at a record on Monday.
With revenue growth stuck in the low teens of late, and expected to come in at 12% next year, investors have recalibrated their expectations after witnessing speedier growth in the years before the 2022 slowdown. Much of the recent optimism centers around Google’s improved position in the artificial intelligence race.
However, the biggest catalyst for the stock in the third quarter had more to do with Google’s relative weakness in AI, compared with its standing in online ads.
Alphabet vs. Nasdaq
Alphabet shares soared in early September, when Google avoided the worst-case scenario in its search antitrust case. Following the government’s victory in its case against the company last year, U.S. District Judge Amit Mehta ruled in the remedies decision last month that Google would not be forced to sell off its Chrome browser, but must share data with competitors.
Mehta said that the rise in AI services from companies like OpenAI has created plenty of new competition in search. Backing up his point, OpenAI last week unveiled ChatGPT Atlas, an AI-powered browser that could directly challenge Chrome.
While investors immediately cheered Mehta’s ruling, Google now has to show that it’s a force in AI, which is serving as the growth engine for the tech sector. Google’s cloud unit benefits from the AI boom as companies count on the technology for running large language models and expanding workloads. And Google is heavily investing in Gemini, its family of AI models, products and services.
Over the weekend, analysts at KeyBanc Capital Markets raised their price target on Alphabet to $300 from $265, expecting that third-quarter results will “show that faster product velocity is driving momentum in Search, Cloud and Waymo,” its autonomous vehicle business.
The stock pop, the analysts wrote, is due to “a combination of the DOJ Search remedies trial being more favorable than expected and more signs of progress in AI across business units.”
Alphabet is scheduled to report results after the bell on Wednesday, alongside rivals Microsoft and Meta. Apple and Amazon report the following day.
Wall Street is expecting to see revenue growth of 13% to $99.89 billion and earnings per share of $2.26, according to LSEG.
‘The bite isn’t fatal’
When it comes to Google’s position in AI, some analysts see reasons for concern.
Bernstein analysts wrote last month after the remedies decision that Mehta’s comments about generative AI competing with search may be a red flag for investors.
“The bite isn’t fatal but it still stings,” wrote the analysts, who have the equivalent of a hold rating on Alphabet.
Mehta dedicated roughly 30 pages of the 226-page filing to explaining generative AI and the market as it exists today. He described the space as “highly competitive” and wrote that there have been “numerous new market entrants” with access to “a lot of capital.”
ChatGPT accounts for about 81% of the global AI chatbot market, according to September data from StatCounter. Perplexity is second at 11%, followed by Microsoft Copilot at 4.1% and Gemini at 2.8%, the firm said.
But Google is aggressively pushing Gemini as far more than just a ChatGPT competitor, and is taking advantage of its strength in various markets for distribution.
Earlier this month, the company launched Gemini Enterprise, targeting corporate clients with agents that perform specific work tasks. In September, Google announced it was rolling out Gemini in Chrome to Mac and Windows users in the U.S. as well as to mobile devices, allowing users to ask Gemini for help understanding the contents of a particular web page, work across tabs, or do more within a single tab, such as schedule a meeting or search for a YouTube video.
Google CEO Sundar Pichai said this month at Salesforce’s Dreamforce conference that Gemini 3, the latest version of the company’s AI model, will be released this year.
Analysts at Mizuho said in a report about the internet market last week that “competitive risks from OpenAI across the internet landscape, particularly at Google, have been topic #1” in more than 100 recent conversations with investors.
Still, they said that they see “competitive fears likely to recede as we refocus on fundamentals with earnings.” For Google, the “imminent roll-out of Gemini 3 could further tilt the sentiment for Alphabet shares toward AI-winner, at least near term,” they wrote.
Even as the remedies resolution was generally welcomed by investors, the company will have to make some concessions, according to the judge’s ruling. Most notably, Google has to make available certain search data and user data to its “qualified competitors.”
Determining which companies fall into that category will be the job of a technical oversight committee at a date that hasn’t yet been announced.
Services like DuckDuckGo and Microsoft Bing may be among the beneficiaries, potentially receiving improved access to some of Google’s search index data under specific licensing arrangements.
Mehta wrote that the data-sharing remedies “can help to close the sizeable advantage Google has in answering long-tail queries, thereby improving product quality and attractiveness to new users.”
Baird analysts wrote that they expect a “modest” impact to Google, because the company doesn’t have to share its data with generative AI competitors like Perplexity and OpenAI. That would have been “more problematic,” the Baird analysts wrote.
Google, which plans to appeal the ruling, declined to comment, but pointed to an earlier blog post on the judge’s decision.
“We have concerns about how these requirements will impact our users and their privacy, and we’re reviewing the decision closely,” the company wrote.
Abiel Garcia, a former deputy attorney general for the California Department of Justice, working in antitrust, said he doesn’t see the ruling having an impact on the way Google operates.
“Maybe some of the data will help competitors’ products at the periphery, but I don’t think this is going to really shift anything,” Garcia, who’s now a partner at Kesselman, Brantly & Stockinge, told CNBC. “It almost encourages Google’s roll-the-dice behavior.”
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., wears a pair of Meta Oakley Vanguard AI glasses during the Meta Connect event in Menlo Park, California, US, on Wednesday, Sept. 17, 2025.
David Paul Morris | Bloomberg | Getty Images
Meta’s AI app has seen a major jolt in downloads since launching its Vibes feed of AI-generated videos, giving investors a glimpse of the company’s artificial intelligence strategy ahead of Wednesday’s third-quarter earnings.
Since releasing Vibes on Sept. 25, the Meta AI app’s downloads on both iOS and Android are up 56% month-to-month to a total of 3.9 million downloads as of Oct. 18, according to data provided to CNBC by mobile research firm Appfigures.
“That’s what I’d call standout growth,” said Appfigures Head of Insights Randy Nelson, adding that “the month’s not even over.”
Still, OpenAI’s rival Sora app, which launched Sept. 30, appears to have more momentum despite only being available on Apple’s iOS platform and requiring an invitation for use. From Sept. 30 through Oct. 18, Sora saw 2.6 million downloads on iOS, compared to the 1.1 million downloads of the Meta AI app, according to Appfigures.
Sora’s early popularity isn’t surprising to nearly a dozen creators, marketers and brand agencies that spoke with CNBC about about their interest and use of the AI tools.
Meta declined to comment.
Creators and marketers say they generally find Sora easier to use. Among the key distinctions is Sora’s capability of producing more realistic looking videos that show people talking, while Vibes only lets users choose select songs as accompanying audio.
The Vibes feed is filled with surreal, playful content, ranging from four lions sharing a pizza in the jungle to a hedgehog singing karaoke.
Meta has been paying creators to produce AI-generated videos for Vibes as a way to boost the visibility of the app, according to people with knowledge of the matter. Meta has sought out influencers who specialize in generative AI tools provided by the startup Midjourney, and is requiring them to sign non-disclosure agreements, according to the people, who asked not to be named because they weren’t authorized to comment on the matter.
Meta’s evolving AI strategy
The Facebook parent debuted the Meta AI app in late April, confirming an earlier CNBC report. The app was originally called Meta View and was used by owners of the Ray-Ban Meta AI glasses to manage their device settings, import photos and perform other utility functions.
The app, which is still used to manage Ray-Ban Meta glasses, was relaunched as Meta AI to serve as the company’s hub for users to interact with the social media firm’s ChatGPT-like AI assistant, but the September launch of Vibes added a video feed component similar to that of TikTok. The key difference is that all of the content found on the Vibes feed has been created entirely by AI generators.
Unlike Sora, which is powered by OpenAI’s proprietary model, Meta AI’s Vibes feature relies on models provided by third parties like Midjourney and Black Forest Labs, according to a Threads post last month from Alexandr Wang, Meta’s chief AI officer and the former CEO of Scale AI. Meta is also developing its own internal generative AI technology, Wang wrote.
Meta’s reliance on third-party AI models to power Vibes underscores the company’s newfound willingness to seek outside help as it tries to get its AI technology back on track. The underwhelming launch of Llama 4 in April spurred CEO Mark Zuckerberg into spending billions of dollars to shake up Meta’s AI organization and install new leaders like Wang, CNBC previously reported.
That overhaul continued last week, when Meta laid off 600 employees in its AI organization. The company spared Wang’s core TBD Labs group, which now overseas touchstone AI efforts like Llama.
Meta’s AI strategy is sure to be a major topic in the company’s third-quarter earnings report and investor call on Wednesday. For the quarter, analysts expect revenue growth of 22% from a year earlier to $49.4 billion, according to LSEG. Wall Street expects revenue growth for the full year of 19% to $196.2 million.
Meta Vibes
Cfoto | Future Publishing | Getty Images
Some of the influencers that Meta is paying to populate Vibes are based in India, where Sora is not yet available and TikTok is banned.
Company executives have previously said that Meta AI usage, largely accessed via the company’s WhatsApp service, is the highest India, the world’s most-populous country, even though not all influencers there get paid.
“One of the biggest reasons that got me excited is because I’ve been in the creator ecosystem for almost 15 years now,” said Gaurav Bisen, a creator from India who posts 10 to 15 times a day on Vibes but isn’t paid by Meta. “Creating content on Instagram, TikTok, YouTube takes a lot of time, energy and investment. But here, it’s so easy. You just type a prompt.”
Bisen said he’s found early traction on Vibes, where his following has grown to more than 25,000. He said he’s learned that short, animated dance clips perform best.
“People who didn’t have the confidence to come in front of a camera can now create from their imagination,” Bisen said. “You can produce creative content without even being in it.”
Still, engagement on Vibes remains limited compared to Instagram or TikTok. Most creators told CNBC that their posts average fewer than 10 likes and almost no comments.
Instead, Vibes users measure success through “remixes” – a feature that lets creators take an AI-generated video, edit the prompt and repost it as their own.
“Remixes kind of seem like the currency on the app,” said Dylan McIntyre, who runs the AI video account JunkBoxAI on Instagram, where he has more than 1.3 million followers but just 22,000 on Vibes. “People are liking what they’re seeing and want to make their own and repost it.”
Meta is leaning heavily into generative AI as it courts creators and competes with OpenAI. Its AI Studio tool lets users build customizable AI characters and chat with them across Messenger, Instagram and WhatsApp.
Investors will also be listening for commentary on the company’s Metaverse strategy.
Meta confirmed on Monday that Vishal Shah, who spent the past four years leading metaverse initiatives, is now helping run AI products as part of the company’s Superintelligence Labs division, which is led by recent high-profile hires, including former GitHub CEO Nat Friedman.
Shah, who will now report to Friedman, was previously a vice president of product at Instagram. The Financial Times first reported on Shah’s new position.
WATCH: Partnership with Meta for smart glasses helps lift EssilorLuxottica sales.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024