Snap on Wednesday announced plans to lay off roughly 1,000 employees as the tech company adopts artificial intelligence (AI) and looks to streamline its operations.
The parent company of Snapchat will also close over 300 open roles as part of its workforce restructuring, which comes after Irenic Capital Management pushed Snap to optimize its portfolio and performance. The firm is an activist investor with an economic interest of roughly 2.5% in the company.
Snap explained that advancements in AI are helping it streamline operations and function with smaller teams as AI generates over 65% of new code, while the company assigns more critical work to focused teams and AI agents.
The tech company had about 5,261 full-time employees as of December, and the layoffs will affect about 16% of the company’s full-time staff.
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Snap’s stock rose nearly 8% Wednesday amid the news, leaving shares down about 25.7% year to date despite a 29% increase over the last month.
The company expects to cut more than $500 million in annualized expenses by the second half of the year, driven significantly by the recently announced layoffs, as well as broader efforts to reduce operating costs and stock-based compensation, CEO Evan Spiegel said. He asked employees in North America to work from home on Wednesday.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SNAP | SNAP INC. | 6.04 | +0.44 | +7.86% |
Snap anticipates $95 million to $130 million in layoff-related charges, most of which will fall in the second quarter, according to a regulatory filing.
Snap’s layoffs come after the company invested heavily in its augmented reality glasses unit, known as Specs. It is planning to launch the product this year.
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Irenic Capital has urged Snap to either spin off or shut down the business unit, which has received $3.5 billion in investment, as a means of conserving cash while the company pursues broader cost cuts.
“Cutting costs may appease an activist in the near term and give long-suffering shareholders some relief, but whether it really leaves the company with a defensible business model and competitive position that it can defend, develop and turn into profits and cash flow is still unclear,” said Russ Mould, investment director at AJ Bell.
Reuters contributed to this report.
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