Activist investor TCI Fund Management calls on Alphabet to cut costs

In a letter to Alphabet chief executive Sundar Pichai, TCI - which has been a significant shareholder since 2017 - said the company has too many employees and the cost per employee is too high.

"Management should publicly disclose an EBIT margin target, substantially reduce losses in Other Bets and increase share buybacks," TCI wrote. Other Bets is the segment that includes Waymo and other special projects.

TCI said that despite strong revenue growth, operating leverage has been minimal over the last fives years. "In Q3 2022, total expenses grew 18% year-over-year, while revenues grew only 6%," it said.

TCI pointed out that "nearly all" other tech companies are reducing costs. Facebook owner Meta reduced headcount by 13% last week, while Amazon is cutting headcount by 10,000, it noted. It added that Microsoft, Salesforce, Stripe and Twitter are also slashing headcount.

"Alphabet’s headcount has increased at an annual rate of 20% since 2017," TCI said. "This growth is excessive, both in relation to historic headcount growth and what the business requires."

TCI, which currently owns shares valued at more than $6bn, said: "In a new era of slower revenue growth, aggressive cost management is essential."