Snap Inc. is reducing its workforce by roughly 10% worldwide, joining the chorus of technology companies that have announced fresh rounds of cuts since the start of the year.
The cuts are being made to “best position our business to execute on our highest priorities,” Snap said in a filing Monday. A spokesperson added that the social media company is reorganizing the team to reduce hierarchy and promote in-person collaboration. The stock was down 3.1% to $16.51 in New York, tracking a broader pullback in the stock market.
The Santa Monica, California-based company employed about 5,400 workers as of September. A 10% reduction based off that total would amount to about 540 jobs lost. Snap said the mass layoffs may extend into the second quarter of 2024 while the company works to comply with local laws.
“The layoffs don’t bode well for the state of Snap’s business,” ahead of its fourth quarter earnings reported scheduled for Tuesday, said Jasmine Enberg, an analyst at Insider Intelligence. “Meta’s blockbuster report is a tough act for Snap to follow.” Enberg expects Snap to report a 3.3% decline in ad revenue in 2023 from a year earlier.
Three months ago, Snap reported a return to revenue growth after two periods of declines but cautioned that its progress may be blunted by advertiser delays brought on by the war in Israel and Gaza.
Snap’s job cuts add to the slew of grim announcements that have been made by technology companies since the beginning of this year as they seek to cut costs after bulking up during the pandemic. Microsoft Corp., Google parent Alphabet Inc., Amazon.com Inc. and Salesforce Inc. are among the more than 100 tech companies that have signaled layoffs in the past month, affecting close to 32,000 employees, according to data compiled by Layoffs.fyi.
Investors have generally cheered the cost-cutting measures. Meta and Amazon added a combined $336 billion in market value last week after beating quarterly earnings and outlook estimates, validating the belt-tightening strategies that have come to define the tech industry in the past year.
Snap has made deep cuts to its business before. In 2022 it fired 20% of its workforce and cut projects that it didn’t expect to help revenue growth or the company’s augmented reality technology. Chief Executive Officer Evan Spiegel later told employees he expected them to be in the office 80% of the time starting in early 2023.
Just four months ago, Snap announced it was closing a division focused on making augmented reality services for businesses, pulling the plug on what was its latest attempt to diversify the ad-dependent company. Shuttering the business was expected to cut 170 jobs.
Snap estimated that the reductions will result in pretax charges of $55 million to $75 million from severance and related costs, as well as other charges including $45 million to $55 million in future cash expenditures. Most of these costs will occur in the first quarter, Snap said.