Google/Alphabet CEO Sundar Pichai wasn’t joking when, earlier this month, he mentioned that more job cuts are on the way. The most recent division to be affected is Alphabet’s X Lab, which is seeing “several dozen employees” being let go, as per a recent report from Bloomberg. This marks approximately the 11th layoff announcement from Google that we’ve reported on in the last 12 months, and the fourth one just this month.
The X Lab serves as Alphabet’s experimental arm for ambitious projects, known as “moonshots,” which include ideas such as wearable head-up displays, self-driving cars, smart contact lenses, flying Internet balloons, and delivery drones. In the era of Google’s cost-cutting measures, it’s worth noting that none of these projects have achieved significant commercial success. Financially, the X Lab falls under Alphabet’s “Other Bets” category, which consistently incurs a quarterly loss of around a billion dollars. While it functions as a research division with hopes of generating new revenue streams in the future, it’s currently viewed as a financial drain by short-term investors, making it a prime target for budget reductions.
Bloomberg obtained a memo detailing the layoffs within the X Lab, and it reveals more than just job cuts. Astro Teller, CEO of X Lab, states: “We’re broadening our approach to focus on spinning out more projects as independent companies funded through market-based capital. We’ll achieve this by expanding our collaboration with a wider range of industry and financial partners and by maintaining a strong emphasis on lean teams and capital efficiency.” Essentially, Google aims for these financially struggling projects to seek external funding, at least partially, on their own.
This model of seeking “outside funding” isn’t new for some of Alphabet’s most significant and promising “Other Bets” initiatives. For instance, the self-driving car company, Waymo, secured rounds of external funding in 2020 and 2021, accumulating over $5 billion, which wasn’t sourced from Google’s advertising revenue. Similarly, Verily, Alphabet’s healthcare data analytics company, has also raised billions from external sources. Both of these entities originated as X Lab projects before transitioning into fully-fledged Alphabet companies. Other projects, like Project Loon (focused on Internet balloons) and Sidewalk Infrastructure Partners (specializing in infrastructure planning), were initially under X or Alphabet but later became independent entities, operating separately from Alphabet’s financial statements. It seems Alphabet is keen on guiding X Lab projects toward one of these two pathways.
While seeking outside funding may subject these projects to greater scrutiny and pressure, it’s noted in the Bloomberg report that “Alphabet had limitations in accommodating numerous Other Bets, causing a bottleneck for X ventures ready for the next phase.” According to individuals familiar with the matter, startups within X often faced a dilemma: waiting for an opportunity within Alphabet or venturing out independently.
