RBC Capital Markets Internet Analyst Brad Erickson discusses the outlook for Alphabet after the company announced mass layoffs at Google.
Watch the full interview here.
00:17: Reading 'between the lines' for Google's outlook
00:25: Future of the business
00:55: Meeting investor expectations
BRAD ERICKSON: I mean, first, in terms of how the company was run and I think what I just mentioned definitely is what's going on with Alphabet is that their business exploded-- we all know that-- during COVID, very self-explanatory. They had to hire more people.
What's interesting, though, and I think if you read between the lines and the 8K they published around the layoffs a few days ago is that they're working on a lot of new projects that are sort of the future of the business, i.e. maybe a competitor to something along the lines of ChatGPT. You were just speaking about before this segment, right?
And so the question is, are these layoffs more a reflection of incremental business weakness? Or are they areas that they can pull back that were more speculative, "three to five year out" type science projects. We don't know the answer. I do expect probably more clarity around that on the earnings call.
But I think they're, unfortunately, they're trying to meet investor expectations around margins and bottom line. There was a lot of concern around that. They knew, I think, they needed to do something and that's why they pulled the trigger there.