Snap is set to cut around 1,000 jobs, representing about 16% of its global workforce. This move is part of CEO Evan Spiegel's plan to reduce costs and achieve profitability, according to Bloomberg.
In a letter to staff, the CEO emphasized that streamlining the workforce is essential for improving efficiency. He mentioned advancements in artificial intelligence technologies that enable employees to complete their tasks much faster.
“While these changes are necessary to unlock Snap's long-term potential, we believe that AI advancements allow our teams to reduce routine work, increase speed, and better support our community, partners, and advertisers,” the entrepreneur stated.
In addition to the layoffs, the company has canceled hiring for over 300 open positions.
According to Spiegel, these measures will help reduce annual expenses by more than $500 million in the second half of this year. The company's total revenue in the first quarter rose by 12%, reaching $1.53 billion.
“Last fall, I described the situation at Snap as a turning point that required a new, faster, and more efficient approach to work, as well as a shift towards profitable growth,” the CEO wrote in a memo.
He added that in recent months, management has carefully analyzed the necessary measures to "serve the community and partners" and made "difficult decisions regarding investment prioritization."
Since the beginning of the year, Snap's stock has dropped by 25%. One reason for this decline is the challenges in expanding its user base, exacerbated by regulatory pressures from various countries. Recent efforts aim to limit social media use among teenagers.
Snap's stock performance. Source: Yahoo Finance.
The company's efforts to reorganize its advertising business have yielded mixed results.
While CEO Evan Spiegel promotes the concept of augmented reality glasses, the firm continues to rely heavily on third-party AI solutions. Meanwhile, competitors are actively investing in developing their own AI tools and necessary infrastructure.
The layoffs come just weeks after investor Irenic Capital Management acquired a stake in the company and called for swift changes to improve financial performance.
Layoffs as a Widespread Trend
Other major tech companies have also implemented significant layoffs. For instance, Meta laid off hundreds of employees worldwide in March and cut about 1,000 jobs from its Reality Labs division in January, while simultaneously increasing investments in artificial intelligence.
In February, Block CEO Jack Dorsey announced the reduction of nearly 4,000 employees. This decision is part of the company's transition to a "more compact, flat, and AI-oriented" structure.
According to Dorsey, artificial intelligence and related tools are fundamentally changing operational principles. Despite financial stability and gross profit growth, Block is restructuring its business for long-term development.
In April, Oracle began laying off thousands of employees amid falling stock prices and significant capital expenditures on AI infrastructure. The company's core business is facing challenges due to competition from generative AI models. Additionally, investors are concerned about rising debt levels and declining cash flows.
Silicon Valley IT corporations have shifted from recommending AI adoption to policies mandating employees to use neural networks in their work.
Nearly half of companies already report positive returns on investments in generative AI. In comparison, the average across other industries is 35%.
Some employers have stopped considering candidates without skills in working with neural networks. Potential employees are tested on their ability to solve tasks using AI and must explain their choice of tools and prompts.
Notably, in February, OpenAI CEO Sam Altman stated that some companies are using artificial intelligence as a pretext for layoffs.