Google‘s parent company, Alphabet Inc., announced on Friday that it will be cutting approximately 12,000 jobs or 6% of its total workforce (Reuters report). This decision comes as the tech industry continues to grapple with layoffs and companies are increasingly turning to artificial intelligence (AI) to shape their future.

This move by Alphabet is particularly significant as the company has long been a leader in the field of AI research. However, the company now faces stiff competition from Microsoft, which has also been investing heavily in AI technology. This week, Microsoft announced that it will be shedding 10,000 jobs, or less than 5% of its workforce, as the company looks to focus on incorporating more AI into its products.

This decision by Alphabet to cut jobs comes as the company faces “a different economic reality” than in the past two years, during which it rapidly expanded its headcount. Alphabet’s CEO, Sundar Pichai, acknowledged this in a staff memo, saying that he takes “full responsibility” for the company’s past decisions.

Despite the job cuts, Pichai emphasized that Google is still working on new AI-driven projects and that the company sees “a substantial opportunity in front of us with AI across our products.” In fact, sources close to the matter have revealed that Alphabet is currently working on a major AI launch, which is expected to take place in the spring of this year.

Analysts have pointed out that Alphabet’s advertising business, which is the backbone of Google’s search engine and YouTube, has been affected by the current economic turbulence. Susannah Streeter, an analyst with Hargreaves Lansdown, stated that “ad growth has come off the boil, a sharp contrast from the busy days of the post-pandemic re-opening which saw a surge in consumer spending.” Additionally, the company also faces competitive and regulatory threats.

It remains unclear if Alphabet will take a one-time financial charge related to the job cuts. However, Microsoft’s severance packages, lease consolidation, and hardware lineup changes are expected to cost the company over $1 billion.

The layoffs at Alphabet will be hitting various geographies and will affect a wide range of roles, including recruiters, corporate staff, and people working on engineering and product teams. In the United States, affected employees will receive severance and six months of healthcare, as well as immigration support. However, notifications of layoffs in other countries will take longer due to local employment laws and practices.

Alphabet’s decision to cut 12,000 jobs is a reflection of the changing economic realities facing the tech industry and the increasing focus on AI as a key driver of future growth. While the company’s CEO, Sundar Pichai, acknowledged the difficult decision to cut jobs, he emphasized that the company is still working on new AI-driven projects and sees “a substantial opportunity in front of us with AI across our products.”