Alphabet must take “aggressive action” to trim headcount and salary expense, and deliver a clear action plan to investors, TCI Fund Management wrote in a letter to CEO Sundar Pichai.

TCI holds a $6 billion stake in the Google parent company, which places it just outside of the top 20 largest Alphabet shareholders, CNBC’s David Faber reported. TCI’s stake represents 0.27% of outstanding Alphabet shares, according to Factset data, a position that the hedge fund has steadily accumulated since 2017.

However, the company has three classes of shares, and co-founders Larry Page and Sergey Brin still have solid voting control thanks to their nearly exclusive ownership of Class B shares, according to the firm’s 2022 proxy report. That makes an activist takeover effectively impossible.

“Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees,” read the letter. TCI’s letter pointed to Altimeter Capital’s Meta letter, which argued that overstaffing at tech companies is “a poorly kept secret” in Silicon Valley.

2022 has been a bruising year for tech employees. Earlier this week, The New York Times reported that Amazon was preparing to lay off 10,000 corporate workers. Meta trimmed headcount by 11,000 the week prior.

Alphabet remains one of the few large tech companies to refrain from reducing headcount. In an internal memo viewed by CNBC, Pichai did announce a hiring slowdown, telling employees that “scarcity breeds clarity.”

TCI noted that headcount has “increased at an annual rate of 20% since 2017,” the year that TCI first disclosed their Alphabet position. A 20% CAGR, TCI argued, “is excessive.”

TCI also took aim at Alphabet’s compensation, historically the gold standard for tech firms. Alphabet disclosed median compensation valued at $295,884 for 2021.

“We acknowledge that Alphabet employs some of the most talented and brightest computer scientists,” the letter continued, “but these represent only a fraction of the employee base.” For nonengineering staff, the letter read, compensation should fall “in-line with other technology companies.”

TCI argued for an increase in share buybacks and the establishment of an EBIT margin target for Google Services. EBIT margin is a measurement of a company’s operating profit as a percentage of revenue. Google Services posted a 39% EBIT margin in 2021. TCI argued that a margin target of “at least 40% is reasonable.”

Significantly, TCI argued that Google’s “Other Bets” category – their Moonshot division – demanded immediate attention, singling out self-driving vertical Waymo as a unit that failed to justify “its excessive investment.” Facebook parent Meta faced similar calls from Brad Gerstner’s Altimeter, which argued for a dramatic reduction in Reality Labs expenses.

Alphabet shares are down more than 30% year-to-date.