Snap will lay off about 1,000 employees, including 16% of its full-time staff, the company said on Wednesday, as it becomes the latest technology company to increase its adoption of artificial intelligence to simplify operations.
The move, which also includes closing more than 300 open positions, comes weeks after Irenic Capital Management, an activist investor, pressured Snapchat’s parent company to optimize its portfolio and improve performance. Irenic has a stake of around 2.5% in the company.
Snap said advances in artificial intelligence are helping it streamline operations and work with smaller teams, with AI generating more than 65% of new code as the company directs critical work to focused teams and AI agents. The company had about 5,261 full-time employees as of December.
At around 3:55 pm, Brasília time, the social media company’s shares rose more than 8%. For the year, the shares have accumulated a drop of close to 30%.
The augmented reality company Specs and plans to launch the product this year.
However, Irenic Capital argued that it close this cash-consuming operation, citing more than US$3.5 billion in investments and around US$500 million in annual losses. The investor also called for broader cost cuts.
“Cost cutting may appease an activist in the short term and provide some relief to long-suffering shareholders, but it remains unclear whether it actually leaves the company with a defensible business model and competitive position that it can defend, develop and turn into profits and cash flow,” said Russ Mould, chief investment officer at AJ Bell.
Cost Savings
Snap expects to cut more than $500 million in annualized expenses by the second half of the year through the mass layoffs, according to Chief Executive Evan Spiegel, as part of a broader plan to reduce operating costs and share-based compensation. He also asked employees in North America to work from home on Wednesday.
AI is reshaping the workforce by automating routine tasks, with more than 80 technology companies cutting around 71,440 jobs this year so far, according to data aggregator Layoffs.fyi.
Snap expects first-quarter revenue to rise about 12% to roughly $1.53 billion, largely in line with Wall Street expectations, according to data compiled by LSEG.
The social media company forecasts adjusted EBITDA of about $233 million for January-March, above Wall Street expectations of $186.8 million.
The company also expects charges of $95 million to $130 million related to mass layoffs to be recorded, primarily in the second quarter, according to a regulatory filing.
Snap is expected to release quarterly results on May 6, after markets close.
