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Yet their headcount grew by double digits. Many tech companies living in fantasy land, having gotten used to free money and strong organic growth essentially g

Yet their headcount grew by double digits. Many tech companies living in fantasy land, having gotten used to free money and strong organic growth essentially guaranteed from secular tailwinds. At a certain scale, and level of competition (more and more social/advertising platforms becoming popular), these companies become more cyclical rather than guaranteed growth bets. Google is a great company that will surely be worth more down the line, but the whole hire as fast as possible and pay increasingly high comp is going to have to come in line with the new reality. You can't expand headcount and employment costs faster than your revenue/profit growth and expect it to end well

kshacker 4y ago
There will always be some leading parameters some lagging parameters. It makes a difference when you are overly leveraged or if you are too small but big companies like google, Amazon, apple should be able to manage some level of forecast leading or lagging the demand, no?
- adam_arthur 4y ago
  Sure, it’s important not to overindex on short term fluctuations. But their employment expense and headcount growth is far, far ahead of their revenue growth. A recession next year is pretty much inevitable at this point due to inflation dynamics and Fed policy. Having their stock get hammered even worse as revenues contract and margin compression eats into earnings is going to lead to many more problems for them in the future than if they just slow the pace of hiring now. They may even be doing layoffs this time next year, which is much easier to avoid if you don’t overhire leading into a recession
  - ikrenji 4y ago
    googles net profit is still a whopping 14 billy dollars. their search monopoly isn't going anywhere anytime soon either. i don't think googlers have anything to worry about
    - adam_arthur 4y ago
      Absolute net profit means nothing without relating it to valuation. $14B is not that significant for a trillion dollar company. It's all relative. Google may be fair value or may not, but ignoring proper approaches to valuation is a good way to lose your money... as many younger investors are starting to learn.
tonmoy 4y ago
Or their profit plummeted because they grew their headcount
- adam_arthur 4y ago
  Yes, increasing employment expense faster than profit growth ex employment will lead to declining profitability… which is exactly my point. What’s your point?
deleted 4y ago
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kshacker 4y ago

There will always be some leading parameters some lagging parameters. It makes a difference when you are overly leveraged or if you are too small but big companies like google, Amazon, apple should be able to manage some level of forecast leading or lagging the demand, no?

adam_arthur 4y ago
Sure, it’s important not to overindex on short term fluctuations. But their employment expense and headcount growth is far, far ahead of their revenue growth. A recession next year is pretty much inevitable at this point due to inflation dynamics and Fed policy. Having their stock get hammered even worse as revenues contract and margin compression eats into earnings is going to lead to many more problems for them in the future than if they just slow the pace of hiring now. They may even be doing layoffs this time next year, which is much easier to avoid if you don’t overhire leading into a recession
- ikrenji 4y ago
  googles net profit is still a whopping 14 billy dollars. their search monopoly isn't going anywhere anytime soon either. i don't think googlers have anything to worry about
  - adam_arthur 4y ago
    Absolute net profit means nothing without relating it to valuation. $14B is not that significant for a trillion dollar company. It's all relative. Google may be fair value or may not, but ignoring proper approaches to valuation is a good way to lose your money... as many younger investors are starting to learn.

tonmoy 4y ago

Or their profit plummeted because they grew their headcount

adam_arthur 4y ago
Yes, increasing employment expense faster than profit growth ex employment will lead to declining profitability… which is exactly my point. What’s your point?

deleted 4y ago

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