Alphabet, parent company of Google (GOOGL) and one of the largest tech companies in the world, is shrinking its worldwide office footprint in an effort to cut costs, and spending a lot of money to do so.
During the third quarter of 2024, the tech giant spent $607 million to offload various office properties around the world in order to “generate strong revenue growth” and “improve efficiency” for “consumers, customers and creators globally,” the company said in its third-quarter earnings report released Tuesday.
“We see opportunities for further growth propelled by AI and think we are well positioned to deliver meaningful innovation, which will translate to revenue growth,” Alphabet’s new Chief Financial Officer Anat Ashkenazi said during an earnings call, as reported by CoStar.
“While we have a strong balance sheet to support those investments, we’ll be looking for efficiencies so we can fund innovation in priority areas,” Ashkenazi added.
A spokesperson for Alphabet did not immediately respond to a request for further comment.
Alphabet’s consolidated revenue during the third quarter increased by 15 percent year-over-year to $88.3 billion, driven largely by profits from Google and reflecting “strong momentum across the business,” the company said.
But Google is one of many tech companies that has had to make up for ambitious investments and overhiring during the COVID-19 pandemic, CoStar reported.
And Alphabet — which opened a 1.3 million-square-foot Hudson Square office in the former St. John’s Terminal in February — isn’t the only tech company to look toward its office portfolio for cost savings.
In 2022, Facebook’s parent company meta announced it would spend at least $2.9 billion to shrink its office footprint around the world.
Alphabet, which leases or owns about 50 million square feet of office space worldwide, has already vacated about 2.7 million square feet of space in Silicon Valley alone in recent years, according to CoStar. It’s now shifting its focus toward larger investments such as data centers.
“I plan to build on these efforts, but also evaluate where we can accelerate work and where we might need to pivot to free up capital for more attractive opportunities,” Ashkenazi said during the call, as reported by CoStar.
This comes after Alphabet announced in February 2023 that it would spend $500 million in “exit costs” to close offices and cut leases, as Commercial Observer previously reported. That news followed the company’s previous labor cuts that amounted to approximately 12,000 layoffs.
Isabelle Durso can be reached at idurso@commercialobserver.com.