A wave of quarterly earnings reports from major companies like Uber, DoorDash, Shopify, and Disney was overshadowed on Thursday by a significant personnel announcement from Alphabet. The company revealed that Demis Hassabis, the head of its AI division and CEO of Google DeepMind, has been elevated to Chairman of the AI unit, while also taking on the role of Chief Scientist at parent company Alphabet. The announcement also disclosed that several DeepMind executives, including Chief Scientist Jeff Dean, are departing to launch a new startup.
Some market observers interpreted this leadership shake-up as a negative signal, causing Alphabet's stock to decline by 4%. In reality, the practical impact of these changes is limited. Hassabis was not previously responsible for the day-to-day operations of DeepMind. That authority has long rested with Koray Kavukcuoglu, the division's Chief Technology Officer, who is now formally taking over as head of Google DeepMind. Conversely, Hassabis, a Nobel laureate, remains the public face and visionary scientist of DeepMind, and he will continue to serve in that external and strategic capacity.
My colleague Erin Woo has learned that internally, even though employees still hold Jeff Dean in high regard, his central influence over the Gemini large language model project had already waned significantly. The core question this restructuring raises is whether it reshapes the list of potential successors to Sundar Pichai, CEO of both Google and Alphabet. Many external analysts have long included Hassabis on that shortlist, alongside Thomas Kurian, the head of Google Cloud.
It is becoming increasingly clear that if Hassabis is more inclined toward a research-focused role rather than a divisional management position, he is unlikely to pursue the top job at Alphabet. His continued leadership of Isomorphic Labs, Alphabet's drug-discovery venture, further supports this inclination toward a deep science career. In other words, this development potentially strengthens the case for Kurian as the next CEO. Of course, a successor for Pichai does not need to be chosen anytime soon. Pichai's position is currently solid. While investors have recently questioned Alphabet's aggressive capital expenditure plans, and the market has raised various concerns about next-generation AI models, these are short-term issues.
Looking at the long term, Pichai has answered critics by demonstrating that Google can lead in AI technology, allaying fears that AI would disrupt its core search cash cow, and fueling the rapid growth of Google Cloud. At just over 50, Pichai is likely to remain at the helm for many years. However, corporate boards must always have a contingency plan. Some argue that given Alphabet's massive scale, the CEO doesn't necessarily need to handle every daily operational detail, so Hassabis could still be a contender. The CEO's core mission is to set long-term strategy and ensure the company's sustainable growth.
Nevertheless, the CEO role inevitably involves complex operational decisions, including many unpleasant tasks, as Pichai's appearance at congressional hearings a few years ago demonstrated. As Pichai himself noted about Hassabis, he is focused on "actively shaping the future of AI." For someone with that ambition, the CEO position might not be the ideal path. Perhaps he is more interested in pursuing a second Nobel Prize than in managing a corporation.
Figma's growth is cooling, putting pressure on its stock price. The design software company's shares fell 15% in after-hours trading on Wednesday. Figma warned that its third-quarter revenue growth would slow significantly and its operating margin would decline, while also announcing the departure of two senior executives. Second-quarter revenue growth was 48%, a 2-percentage-point improvement over the first quarter, but the company forecast third-quarter growth to slow to 36%. While still impressive, a 12-percentage-point drop is a major concern, especially as AI-powered competitors emerge and major AI players like Anthropic enter the field. Furthermore, Figma projects a full-year operating margin of only 9%, compared to 13% in the first half of the year. Figma attributed the margin decline to increased investment. The team is developing several new products that are still in testing and not yet generating revenue, with a full launch planned only after the products are mature. This explanation did not convince investors in the capital markets.
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