Google confirms that their restructuring is not driven by AI replacing jobs

In the fourth quarter of 2023, Google's advertising products powered by artificial intelligence were noted as "bright spots" despite falling short of analyst expectations.

Ad revenue amounted to $65.5 billion, which was approximately $420 million lower than estimates. The company's Network division, responsible for advertising sales outside its properties, experienced a decline to $8.3 billion. Google faced scrutiny in 2023 due to reports of quality and safety issues within its partner networks, leading major advertisers to reduce spending.

Search revenue, the primary contributor to Alphabet's revenue growth, increased by 13% to $48 billion, while YouTube's ad revenue accelerated by 16% to $9.2 billion. Google highlighted the success of Performance Max and its newer Demand Gen format as driving momentum amid significant investment in artificial intelligence.

According to Google's Chief Business Officer Philipp Schindler, "tens of thousands" of advertisers are currently testing Demand Gen campaigns, which automatically place ads across platforms like YouTube, Discover, and Gmail. He also noted increased adoption of Google's automatically created assets in the fourth quarter.

Schindler contested suggestions that the emphasis on AI-powered products is displacing jobs, despite recent layoffs. He attributed the restructuring to a focus on servicing small to medium-sized clients rather than automation replacing roles.

Alphabet CEO Sundar Pichai revealed plans for additional workforce reductions to realign the organization around priority investments, including artificial intelligence. The company anticipates severance expenses of approximately $700 million in the first quarter of 2024.

Throughout 2023, Alphabet reduced its workforce by 7,732 employees, or 4%, resulting in $2.1 billion in severance charges and $1.8 billion in office space reduction costs.

Although Google's advertising performance in the fourth quarter fell short of estimates, Alphabet's overall revenue reached $86.3 billion, up 13% year-on-year, with profit increasing by 52% to $20.7 billion.

The cloud division experienced significant growth, with revenue up 26% to $9.2 billion and profit tripling to $864 million. Alphabet's Services revenue grew by 12% to $76.3 billion, with strong subscription growth across YouTube and Google One.

Alphabet's growth was most pronounced in the Asia-Pacific region, followed by Europe, the Middle East, and Africa, the U.S., and Other Americas.

For the full year, Alphabet reported $307.4 billion in revenue and $73.8 billion in profit, up 9% and 23%, respectively.