Alphabet's AI Lab DeepMind Cut Employee Costs by 39% in 2022, Reported Decline in Profit

Alphabet’s AI Lab DeepMind Cut Employee Costs by 39% in 2022, Reported Decline in Profit

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by Darya Rudz · 3 min read
Alphabet’s AI Lab DeepMind Cut Employee Costs by 39% in 2022, Reported Decline in Profit
Photo: Depositphotos

Despite these financial challenges, Google, which acquired DeepMind in 2014, has committed to extending financial support to the company for at least another 12 months from September 28.

DeepMind, Alphabet Inc‘s (NASDAQ: GOOGL) division responsible for developing general-purpose artificial intelligence (AI) technology, reduced employee expenses by 39% last year within its cost-cutting strategy. According to DeepMind’s filing with a UK government agency, the staff costs and related expenses totaled 594.5 million pounds ($731 million) in fiscal 2022, down from 969.4 million pounds ($1.2 billion) in 2021. As a result of the staff cost reduction, administration expenses decreased as well.

Notably, the efforts affected the company’s profitability. In 2022, DeepMind generated 60.9 million pounds ($74.9 million) in revenue, which is more than 40% lower compared to 2021.

One of the latest headcount cuts took place in January when Alphabet said it would lay off 12,000 employees, or roughly 6% of its workforce, as well as announced its decision to shut DeepMind’s operations in Edmonton, Canada. The office used to be the only one DeepMind directly managed, which led to high resource consumption.

Prior to being acquired by Google in 2014, DeepMind made all of its money by selling the technologies it developed to businesses and companies. Now, DeepMind generates revenue from the research and development services it provides to other entities within Alphabet. Despite DeepMind’s financial challenges, Google has committed to extending financial support to the company for at least another 12 months from September 28.

Since the acquisition, DeepMind has been negotiating with Alphabet to get a certain independence in running its business. However, it abandoned its attempts amid the announcement about the merger of DeepMind and Google Brain AI research units. The move aimed to “deliver AI research and products that dramatically improve the lives of billions of people, transform industries, advance science, and serve diverse communities.”

Announcing the merger, Alphabet CEO Sundar Pichai stated:

“Beginning in the second quarter of 2023, the costs associated with teams and activities transferred from Google Research will move from Google Services to Google DeepMind within Alphabet’s unallocated corporate costs.”

Known as Google DeepMind, the combined unit is run by Demis Hassabis, DeepMind’s co-founder.

Layoffs Across Alphabet

2022 was a year of profound change and challenge for Alphabet. The world contended with concurrent health, economic, social, and climate challenges, which affected the tech giant’s business across all of its units. Looking for ways to get the maximum in given circumstances, the executive board of Alphabet took a number of cost-cutting measures, including massive layoffs.

In November 2022, Alphabet announced it would let go of 10,000 employees. In fact, at the beginning of 2023, as many as 12,000 people lost their jobs at Alphabet. It was the largest-ever downsizing measure taken by the tech giant.

Last month, Alphabet started implementing staff reductions within its global recruiting team as part of its ongoing slowdown in hiring. A few hundred employees have to search for new roles within the company and elsewhere. A significant majority of the team has been kept for hiring critical roles.

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