Google’s parent company, Alphabet Inc (GOOGL.O), announced on Friday it will cut about 12,000 jobs, or 6 perc cent of its workforce, as the technology sector reels from layoffs and companies stake their futures on artificial intelligence (AI).

Alphabet’s shares rose almost 4 per cent in pre-market trading. The cuts come at a delicate moment for the US company, which has long been the leader in key areas of AI research.

Alphabet now faces a challenge from Microsoft Corp (MSFT.O) in a branch of tech that can, for instance, create virtually any content a user can think up and type in a text box. Microsoft this week said recession worries were forcing it to shed 10,000 jobs, less than 5 per cent of its workforce, and would focus on imbuing its products with more AI going forward — a point Alphabet’s CEO Sundar Pichai echoed in a staff memo.

Alphabet faced “a different economic reality” from the past two years when it rapidly expanded headcount, decisions for which Pichai said he took “full responsibility.”

Still, he said, Google was gearing up “to share some entirely new experiences for users, developers and businesses,” and the company has “a substantial opportunity in front of us with AI across our products.”

Alphabet’s layoffs followed a review of its people and priorities, leading to layoffs across geographies, he said. Among those facing cuts included recruiters, corporate staff, engineering and product teams, he said.

In the United States, where Alphabet has already emailed affected employees, staff would receive severance and six months of healthcare as well as immigration support. Overseas, layoff notifications will take longer due to local employment laws and practices, Pichai added.

Susannah Streeter, an analyst with Hargreaves Lansdown, said Alphabet’s advertising business, which underpins Google’s search engine and YouTube, was not immune to economic turbulence.

“Ad growth has come off the boil, a sharp contrast from the busy days of the post-pandemic re-opening which saw a surge in consumer spending,” she said. The company faces competitive and regulatory threats as well, she said.

• A Reuters report / By Jeffrey Dastin in Davos, Switzerland