With its recently disclosed plans for a 10% personnel reduction, Snapchat’s parent company, Snap, is the latest in the tech industry to undertake layoffs, the firm revealed on Monday. Based on headcount data Snap disclosed in November 2023, when it experienced small-scale layoffs of its then-over 5,000 employees, the layoffs would affect about 500+ employees.
In an SEC statement announcing the layoffs, Snap stated that the action was required to sustain its continued expansion.
“We have made the difficult decision to restructure our team 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,” the filing said. Consequently, we presently project pre-tax charges of between $55 million and $75 million, mostly from severance and associated costs, and other charges, of which $45 million to $55 million are anticipated to come from future cash outlays.
Snap said that most of those expenses will be incurred in the first quarter of 2024, however, certain expenses would extend into the second quarter due to local laws and other considerations. On February 6, following the close of the market, the company is scheduled to release its earnings.
A representative for Snap told TechCrunch, “We are reorganizing our team to reduce hierarchy and promote in-person collaboration.” “Our primary goal is providing support to our departing team members, and we sincerely appreciate all of their efforts and numerous contributions to Snap,” they continued.
Following a minor workforce decrease late in the previous year when Snap reconfigured its product team, again with an emphasis on lowering layers and speeding up decision-making, the business announced this second wave of layoffs in a couple of months. Along with less than twenty other employees in the product division, Nima Khajehnouri, Snap’s vice president of engineering, also left at that time. After less than a year, Snap closed its enterprise services segment in September of last year. The business’s investments in hardware haven’t paid off either; Pixy, the company’s drone, was recently recalled due to a fire hazard and canceled, along with Snap Spectacles.
2022 saw Snap make 20% layoffs as part of a wider reorganization.
When Snap released its Q3 earnings in October, it surprised analysts with higher-than-expected sales and earnings per share of $1.19 billion and 2 cents, compared to projections of $1.11 billion and a 4-cent loss. This caused Snap’s stock price to initially soar. In terms of user growth, the company outperformed expectations, posting 406 million daily active users globally, as opposed to the anticipated 405.7 million. Nonetheless, the company’s quarterly net loss of $368 million increased by 2% year over year.
Snap warned investors that the ad market was still unstable despite the earnings beat, pointing out that it had observed some of its clients’ ad campaigns paused. Research firm Insider Intelligence estimates that the company holds a 0.6% market share in digital ads worldwide. According to the firm’s forecasts, Snap’s net worldwide ad income in 2024 will be $4.12 billion.
Principal analyst Jasmine Enberg stated, “The layoffs don’t bode well for the state of Snap’s business ahead of its Q4 2023 earnings.” “Snap is likely attempting to win back some favor with investors, who rewarded its rival for its cost-cutting efforts and its sustained “do more with less” mantra going into 2024. Meta’s spectacular report is a hard act for Snap to follow. Enberg continued, “We anticipate Snap will post a 3.3% year-over-year fall in ad revenue in 2023.
As per its Q3 press release, Snap employed 5,367 people as of Q3.
According to Business Insider, Snap started laying off employees on Friday, letting go of several dozen workers before making a statement to the entire firm. This week, further layoffs were anticipated, according to the article.
