Google CEO Pichai struggled to navigate a pressure-filled year

Google's blowout earnings report in April, which sparked the biggest rally in Alphabet shares since 2015 and pushed its market cap past $2 trillion for the first time, tempered fear that the company was falling behind in artificial intelligence.

As executives enthusiastically talked about the results with Google's employees at an all-hands meeting the following week, it was clear that Wall Street viewed things differently than the company's workforce.

"We've noticed a significant decline in morale, increased distrust and a disconnect between leadership and the workforce," one employee wrote in a comment that was read by executives at the meeting. "How does leadership plan to address these concerns and regain the trust, morale and cohesion that have been foundational to our company's success?"

The comment was highly rated on an internal forum.

"Despite the company's stellar performance and record earnings, many Googlers have not received meaningful compensation increases" another top-rated employee question read.

That meeting set the stage for what would be a year of contrasting takes from the company's vocal workforce. As Google faced some of the most intense pressure its experienced since going public two decades ago, so too did CEO Sundar Pichai, who took the helm in 2015.

Pichai oversaw a steady stream of revenue growth this year in key areas like search ads and cloud. The company rolled out groundbreaking technologies, rounded out its AI strategy despite a slew of embarrassing product incidents and saw its stock price rise more than 40% as of Thursday's close, ahead of the S&P 500 but trailing rivals Meta and Amazon.

Over the course of 2024, many staffers questioned Pichai's vision following product mishaps in the first half of the year as well as internal shake-ups and layoffs, according to conversations with more than a dozen employees, audio recordings and internal correspondence. 

As the second half of the year progressed and Google rolled out a number of eye-catching AI products, Pichai's standing improved, though some skepticism remains, sources told CNBC.

After the introduction of ChatGPT in late 2022, the tech industry saw an influx of AI products from Microsoft, with its Copilot AI assistant, and Meta, which placed its Meta AI chatbot in the search functions of its apps, as well as from hot startups like OpenAI and Perplexity.

The popularity of those tools has eaten into Google's grip on U.S. search. The company's share of the search advertising market is expected to dip below 50% in 2025, which would be the first time falling below that mark in more than a decade, according to research firm eMarketer.

Google responded to the pressures from new AI tools with offerings of its own. The company in 2024 rebranded its family of AI models as Gemini and released a number of products that were well received. But in its scramble to play catch-up, the company also released a pair of AI products that initially proved embarrassing. 

In February, Google launched Imagen 2, which turned user prompts into AI-generated images. Immediately after it was introduced, the product came under scrutiny for historical inaccuracies discovered by users. Notably, when one user asked it to show a German soldier in 1943, the tool depicted a racially diverse set of soldiers wearing German military uniforms of the era. 

The company pulled the feature, and Pichai told employees the company had "offended our users and shown bias," according to a memo. Google said it would take a few weeks to relaunch Imagen 2, but it ended up being six months before it was revived as Imagen 3 in August. 

"We definitely messed up on the image generation," Google co-founder Sergey Brin told a small crowd at a hacker house in March, in a video posted to YouTube. "It was mostly due to just not thorough testing." 

The launch of AI Overview in May caused a similar reaction. 

That product showed users AI summaries atop Google's traditional search results. Pichai hyped the product, calling it the biggest change to search in 25 years. Once again, users were quick to find problems.

When asked "How many rocks should I eat each day," the tool said, "According to UC Berkeley geologists, people should eat at least one small rock a day." AI Overview also listed the vitamins and digestive benefits of rocks.

Google responded by saying it would add more guardrails to AI Overview for health-related queries but said the mistakes weren't hallucinations, and were rather just rare edge cases. Search Vice President Liz Reid told employees at an all-hands meeting in June that AI Overview's launch shouldn't discourage them from taking risks. 

"We should act with urgency," Reid said. "When we find new problems, we should do the extensive testing but we won't always find everything and that just means that we respond."

Beyond its AI blunders, Google also saw its greatest regulatory challenges to date in 2024.

In August, a federal judge ruled that the company illegally holds a monopoly in the search market. The Justice Department in November asked that Google be forced to divest its Chrome internet browser unit as a remedy for the ruling

The DOJ's request represents the agency's most aggressive attempt to break up a tech company since its antitrust case against Microsoft, which reached a settlement in 2001.

The remedies are expected to be decided next summer, and Google has said it will appeal, likely dragging out the situation a couple more years, but the company faces more antitrust hurdles. 

In a separate case, the DOJ accused the company of illegally dominating online ad technology. That trial closed in September and awaits a judge ruling. In October, a U.S. judge issued a permanent injunction that will force Google to offer alternatives to its Google Play app store for Android phones. After the ruling in October, Google won a temporary pause on the ruling, meaning it won't have to open up Android to more app stores yet.

Amid the external pressure, Google notched some notable victories particularly toward the end of 2024, leading to a more positive sentiment from people within and outside the company.

Google successfully launched its most powerful suite of new Gemini models that underpin all of the company's AI products, including its lightweight model Gemini Flash, which has been popular among developers. YouTube's combined ad and subscription revenue over the past four quarters surpassed $50 billion. 

In the third quarter, Google saw the fastest-growing cloud business across the big tech players, up 35% over last year, with operating margins of 17%. The company has also seen double-digit revenue growth for each of the past four quarters and launched Trillium, its powerful sixth generation Tensor Processing Units, or TPUs, which were also found to have powered Apple's AI models. 

Despite the blunders, AI Overview reached nearly 1 billion monthly users by the end of October. Demand for AI software has also driven consistent growth for the company's cloud infrastructure. And Google launched an impressive video generation product, Veo 2, this month as well as an updated AI note-taking product, NotebookLM.

Beyond AI, Google in December announced Willow, a chip the company calls its biggest step in the march toward commercially viable quantum computing. The Waymo self-driving car unit was also a bright spot, expanding its robotaxi service to three cities and laying the groundwork for even more expansion in 2025. The company has delivered 4 million fully autonomous rides this year, with plans to commercially launch in Austin, Texas, and Atlanta next year.  

But as Pichai approaches a decade running Google and starts his sixth year as CEO of parent Alphabet, questions remain about his ability to guide the company into the future.

Internally, employees routinely criticize leadership on the company's Memegen messaging board, and some have aired their grievances publicly. 

"Google does not have one single visionary leader," a Google software engineer wrote in a LinkedIn post earlier this year that received more than 8,500 reactions. "Not a one. From the C-suite to the SVPs to the VPs, they are all profoundly boring and glassy-eyed."

In October, Google announced it would shake up the leadership of its ads and search division.

The company replaced longtime search boss Prabhakar Raghavan with Nick Fox, a deputy of Raghavan's and a career Google employee. Raghavan was given the title of "chief scientist," but internally, he is now listed as an "IC," or individual contributor. 

Google also shifted the team working on its Gemini AI app to the Google DeepMind division, under AI head Demis Hassabis. Employees praised Pichai's leadership shuffle, but some complained that the moves should've happened sooner.

Notably, some employees were perturbed when Raghavan addressed employees at an all-hands meeting in April, when he urged them to move faster, according to several people who spoke with CNBC. Raghavan noted that the staffers working to fix the failed Imagen 2 tool had increased their workloads from 100 hours a week to 120 hours to correct it in a timely manner.

Pichai has made efforts to get Google back to its nimble startup-like culture. 

When addressing employees, Pichai often name-checked co-founders Sergey Brin and Larry Page to remind them of Google's scrappy roots. He's flattened the company, removing 10% of middle management, according to audio of a December all-hands meeting. And in the spring, Pichai greenlit a hackathon, allowing employees to build using Google products that have yet to be announced. Pichai has also personally joined meetings with Google's Labs team and enabled them to move quickly on products like NotebookLM, one of the company's hit AI products in 2024.

After Brin's hacker house appearance in March, some employees internally joked he should retake the helm, nostalgic for what they perceived as a visionary leader devoid of corporate speak. 

Brin co-founded Google with Page in 1998, but he stepped down as president of Alphabet in 2019. Brin, who remains a board member and a principal shareholder with a stake worth more than $140 billion, began appearing more frequently on campus starting in 2023, as part of an effort to help ramp up Google's position in the hypercompetitive AI market. Employees, particularly working in AI and DeepMind said they've seen Brin walking around the company's Mountain View, California, headquarters throughout the year and have been able to ask him questions for projects they're pursuing.

Despite Brin's reemergence, several employees told CNBC they're doubtful he could adequately run what has become an increasingly larger and complex corporation. 

Employees said that although Pichai didn't strike them as particularly visionary or as a wartime leader, it's hard to find someone better suited for the job, given all the complexities of Alphabet. The key quandary remains: move too early and risk widespread criticism; move too late and risk missing the boat.

Through the year, morale inside Google wavered. Efforts to cut costs across the company in order to invest more in AI resulted in some teams feeling bifurcated and created yet another challenge for Pichai.

Within the company's AI and DeepMind divisions, morale is mostly high, according to employees, boosted by hefty investments. Elsewhere, the vibes have been marred by cost cuts, bureaucracy and declining trust in leadership, employees said. 

DeepMind and AI teams have held off-sites, team-building activities, and have much bigger travel and recruiting budgets, people familiar with the matter said. In the spring, the company moved employees out of an eight-story office on San Francisco's waterfront Embarcadero street and replaced them with AI and AI adjacent teams. 

A meme posted internally in November summed it up. 

The meme featured a photo of the cast of "Wicked" actors, where one, labeled "execs" looked longingly at one fellow actor labeled "Gemini" while ignoring the other beside her, which was labeled as "users."

A Google spokesperson contested the idea that AI workers are receiving favorable treatment and said higher travel and recruiting budgets are not exclusive to AI teams or DeepMind. 

"Most Googlers, regardless of team, continue to feel positively about our mission and the company's future, and are proud to work here," the spokesperson said. 

A few employees say they're no longer incentivized by the prospects of landing a promotion, which have become harder to achieve, and rather by the hope of avoiding layoffs. 

Despite slashing 12,000 jobs, or roughly 6% of its workforce, in 2023, Google has continued eliminating roles this year. In her first public statements as Google's CFO, Anat Ashkenazi, told Wall Street in October that one of her top priorities would be to drive more "cost efficiencies" across the company in order to invest more in AI.

"I think any organization can always push a little further and I'll be looking at additional opportunities," Ashkenazi said.

That month, Google posted a job listing for a "Central Reorg Support Team Partner." The responsibilities of that fixed-term contract position would include consulting with local HR teams and noted the need for the support staff's "ability to operate with empathy and diffuse/de-escalate challenging conversations/situations." 

"Hire the smartest people so they can tell us what to do," one employee wrote on the internal forum in meme-style font atop the images of Brin and Page. "Hire a reorg consultant so they can tell us how to layoff the smartest people," another said. 

Google ultimately took the job listing down.

Touting its AI technology to clients, Pichai's leadership team has been aggressively pursuing federal government contracts, which has caused a heightened strain in some areas within the outspoken workforce since the beginning of the year.

Google terminated more than 50 employees after a series of protests against Project Nimbus, a $1.2 billion joint contract with Amazon that provides the Israeli government and military with cloud computing and AI services. Executives repeatedly said the contract didn't violate any of the company's "AI principles."

However, documents and reports show the company's agreement allowed for giving Israel AI tools that included image categorization, object tracking, as well as provisions for state-owned weapons manufacturers. Earlier this month, a New York Times report found that four months prior to signing on to Nimbus, officials at the company worried that signing the deal would harm its reputation and that "Google Cloud services could be used for, or linked to, the facilitation of human rights violations."

In an all-hands meeting in April, a highly rated question asked why employees who did not participate in the protests were also fired, which was reported and cited in a National Labor Relations Board complaint from affected employees. Chris Rackow, Google's security chief, took the stage at the all-hands and rebutted those claims.

"This was a very clear case of employees disrupting and occupying work spaces, and making other employees feel unsafe," a Google spokesperson told CNBC, adding that the company "carefully confirmed" that every person terminated was involved in the protests. "By any standard, their behavior was completely unacceptable."

That round of job eliminations underscored Google's clampdown on internal discussions related to hot-button topics, including politics and geopolitical conflicts, which was encouraged by executives several years prior.

One internal meme that got more than 2,000 likes, compared Google to Star Wars' Anakin Skywalker. The meme shows an image of a smiling childhood Skywalker, framed by one of the company's original, colorful employee badges. The meme progresses Skywalker's age in two later versions of the badge. 

The final badge shows Darth Vader working for "Google," spelled out in the font of IBM's logo.