Google parent company Alphabet is paying hundreds of millions of dollars more to further shrink its office space around the world as it focuses its growing revenue on technological innovation.
The Silicon Valley tech giant paid $607 million through the quarter ended Sept. 30 in the latest impairment charge to offload extraneous office properties and reallocate capital to higher-priority investments like artificial intelligence.
"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," Anat Ashkenazi, Alphabet's new chief financial officer, told analysts on the company's earnings call Tuesday. "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."
Google has been at the forefront of trends that have rippled across the global office market, in part due to its investments in employee perks and amenities to attract and retain talent. However, it was also among some of the world's largest tech companies that were caught by surprise by pandemic-related growth, hired aggressively as a response, and are now walking back investments they had made that no longer line up with their headcounts or real estate needs.
The firm, based in Mountain View, reported a quarterly profit of $26.3 billion, a 34% spike compared to the same period last year and well beyond analysts' expectations of nearly $23 billion.
The company has stuck to a more prudent approach to real estate growth, weeding through its office portfolio and shifting the savings toward investments such as data centers. Alphabet reported about $13 billion in capital expenditures for the third quarter, a 62% jump from a year earlier.
Restructuring efforts
Google has vacated about 2.7 million square feet of leased office space in recent years around its Silicon Valley headquarters alone.
Ashkenazi indicated no reason for the company to shift its strategy as it hones in on "reengineering our cost structure," efforts that include optimizing the tech giant's headcount growth as well as its physical footprint.
"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," said the CFO, who assumed the role earlier this summer.
The company leases or owns about 50 million square feet of office and flexible space around the world, according to CoStar data.
Alphabet paid roughly $4 billion in expenses last year related to its restructuring plans, including one of the biggest round of job cuts in Alphabet's history as well as a series of office closings across the country.
The company employed about 181,270 people by the end of the third quarter, down from the more than 190,230-person workforce it had the year prior and a notable drop after decades of growth, another signal that it is unlikely to return to the days of rapidly expanding its global office footprint.