Snap Inc., the parent company of the popular social media platform Snapchat, on Monday announced to trim 10% of its global workforce, affecting approximately 528 full-time employees. The move aligns with the broader industry trend, especially across the tech sector.
“In order to best position our business to execute on our highest priorities, and to ensure we have the capacity to invest incrementally to support our growth over time, we have made the difficult decision to restructure our team,” the company said in a US SEC filing.
The layoffs come as Snap prepares to report its fourth-quarter results, with some analysts viewing the layoffs as a strategic move to appease investors who have favored cost-reduction efforts from competitors. Snap’s restructuring is expected to incur pre-tax charges between $55 million to $75 million, primarily from severance and related expenses. Out of this, $45 million to $55 million are expected to be future cash expenditures. The majority of these costs will be realized in the first quarter of 2024.
The company’s challenges extend beyond workforce reductions. Snap has had trouble turning its broad popularity among younger audiences into consistent sources of revenue. In addition to experiencing difficulties with augmented reality projects and other hardware projects, Snap has found it difficult to diversify its revenue streams outside digital advertising. Despite these challenges, CEO Evan Spiegel has set ambitious goals for 2024, including significant growth in daily users and ad revenue.
The downsizing decision by Snap is part of a broader trend of job cuts across the tech sector, with major firms like Amazon and Alphabet also announcing layoffs in January. While one cannot pinpoint one reason for these layoffs, executives have justified the move citing a pandemic hiring spree that led to overstaffing, high inflation rates, and weak consumer demand impacting the sector’s revenues and growth prospects.