Google workers express concerns about low morale following disappointing financial results.

• Last week, during a company-wide meeting, Google staff raised concerns about cost reductions, layoffs, and "mood" problems after Google announced better-than-expected first-quarter earnings.
• Sundar Pichai, CEO, and Ruth Porat, CFO, announced that the company is likely to experience fewer layoffs in the second half of 2024.
• "Our priority is to invest in growth," Porat said.

In two years, Google's business has experienced its fastest growth rate, and a strong earnings report in April caused a significant increase in shares, surpassing $2 trillion in market cap.

During the all-hands meeting last week with CEO Sundar Pichai and CFO Ruth Porat, employees were more concerned with the reasons behind their performance not resulting in higher salaries and the duration of the company's cost-saving measures.

"Our company's success has been built on trust, morale, and cohesion between leadership and the workforce. However, we have observed a decline in these areas, which has led to increased distrust. How can leadership address these concerns and restore the foundation of our company's success?"

The forum comments and questions are being summarized by Google using artificial intelligence.

The leadership of Alphabet has been under attack from vocal staff members for the past few years due to various issues such as post-pandemic return-to-office mandates, cloud contracts with the military, fewer perks, extended layoffs, and other cost cuts that began in 2022.

Complaints about a lack of trust and tighter deadlines with fewer resources and diminished opportunities for internal advancement have also been made by employees.

Despite Alphabet's better-than-expected first-quarter earnings report, including the announcement of its first dividend and a $70 billion buyback, internal strife persists.

"Although the company has excelled and achieved impressive earnings, many Google employees have not received significant salary increases." The top-rated employee question raised was, "When will employee compensation accurately reflect the company's success, and is there a deliberate decision to keep wages low due to a declining job market?"

The company's focus on artificial intelligence was highlighted in a highly-rated comment.

The post stated that many people see a disconnect between spending billions on stock buybacks and dividends and investing in AI and retraining critical Googlers.

"Porat stated that our top priority is to invest in growth and that revenue should grow at a faster rate than expenses."

She acknowledged leadership's errors in managing investments.

"Porat stated that the issue was two years ago when expenses started growing faster than revenues, which resulted in an upside-down situation. She added that this is not sustainable."

Google executives have been hammering this theme of late.

In a recent internal meeting, boss Prabhakar Raghavan highlighted Google's core business challenges, stating that "things are not like they were 15 to 20 years ago," and encouraged employees to work faster. He emphasized to his team that "it's not like life is going to be hunky-dory, forever."

Despite cost cuts, Google's cloud business instructed employees to move within shorter timelines with fewer resources.

Google's use of cash

Last week's meeting saw a large number of employee inquiries about the company's buyback, as stated by Porat.

Porat stated that Alphabet had more than $100 billion in cash on the balance sheet as of last quarter, but draining it would put the company in the same position as in 2022.

Distributing cash to shareholders is not recorded as an expense on the balance sheet, she stated, emphasizing that the board has a duty to consider such actions. Porat pointed out that buybacks and dividends do not replace investments in AI.

Pichai chimed in when Porat wrapped up her response.

He remarked, "You almost broke the record for the longest TGIF response." All-hands meetings were originally known as TGIFs due to taking place on Fridays, but they can now happen on different days of the week.

Pichai joked that leadership should give a "Finance 101" Ted Talk to employees.

Pichai stated that "leadership is responsible for addressing the decline in employee morale and that it is an ongoing process."

Pichai said the company staffed up too much during the Covid pandemic.

"From hiring many employees, we have had to make course corrections," Pichai stated.

At the end of 2022, Alphabet's full-time headcount surpassed 190,000, representing a 22% increase from the previous year and a 40% rise from 2020's close.

In 2022, Pichai, who succeeded Larry Page as Alphabet CEO in 2019, faced criticism for his communication style and his high salary, which reached $226 million, including stock awards.

In 2022, the package included $218 million in equities through a triennial stock grant. In 2023, his total pay was $8.8 million, up from $8 million the previous year (excluding the stock grant), according to Alphabet's proxy filing. Besides his $2 million salary for each year, most of his additional compensation was for personal security.

At a time when the company is downsizing, there have been complaints from employees about Pichai's compensation level.

"What is the company's headcount strategy based on the recent headcount and positive earnings? Another question is: Are we finished with cost-cutting due to the strong results?"

Pichai stated that the company is undergoing a lengthy transition period, which involves reducing costs and enhancing efficiency. He emphasized that the company aims to maintain this level of efficiency indefinitely.

"We're growing our expenses as a company this year, but we're moderating our pace of growth," Pichai stated. "We see opportunities where we can re-allocate people and get things done."

Google will continue to invest in its top priorities and hire in those areas, as stated by a spokesperson to CNBC.

Executives at the all-hands meeting announced that most employees will receive a pay raise this year, including an increased salary, equity grants, and a bonus. However, it was also stated that staffers who received raises last year received smaller raises than usual.

Google is reportedly laying off at least 200 employees from its "Core" organization, which includes key teams and engineering talent, amid growing concerns about jobs moving from the U.S. to lower-cost locations.

Despite the strong earnings report, executives were questioned about the ongoing layoffs and inquired about when the uncertainty and disruption caused by layoffs would end.

In the first half of 2024, the company will have completed most of its layoffs, as stated by Pichai.

"Pichai stated that the second half of the year will have a smaller scale due to current conditions, and the company will continue to be disciplined in managing headcount growth throughout the year."

The company continues to face difficult decisions about investing in new projects.

"Pichai stated that there is a high demand to undertake new tasks, but in the past, we would have simply reacted by increasing our workforce. However, he explained that this is no longer possible during our current transition."

Jim Cramer praised the transparency level during Alphabet's investor call, calling it "remarkable."