Snap, the parent company of Snapchat, has revealed plans to reduce its workforce by 10%, affecting over 500 employees. The decision was announced in an SEC filing, with the company citing the need to streamline operations and support future growth as the primary reasons for the layoffs. Snap anticipates incurring pre-tax charges ranging from $55 million to $75 million, mainly consisting of severance and related costs, with a significant portion expected to be future cash expenditures.
Key Takeaway
Snap, the parent company of Snapchat, is implementing a 10% workforce reduction to streamline operations and support future growth. The reorganization aims to reduce hierarchy and promote in-person collaboration, following a previous round of layoffs focused on enhancing decision-making efficiency. Despite positive Q3 earnings, Snap’s net loss widened, prompting the company to take strategic measures to optimize its operations.
Restructuring for Growth
The company emphasized that the reorganization is aimed at reducing hierarchy and fostering in-person collaboration. This move follows a previous round of layoffs late last year, which focused on restructuring the product team to enhance decision-making efficiency and reduce organizational layers. Additionally, Snap recently closed its enterprise services division after less than a year of operation.
Financial Performance and Stock Movement
Despite the workforce reduction, Snap reported positive Q3 earnings, surpassing analysts’ revenue and earnings per share estimates. The company’s global daily active users also exceeded expectations, reaching 406 million. However, Snap’s net loss widened by 2% year-over-year to $368 million in the quarter. The layoffs are expected to result in a significant impact on the company’s financials, with the majority of costs anticipated to be incurred in the first quarter of 2024.
Market Response and Ongoing Layoffs
Following the announcement, Snap’s stock price initially experienced a surge. The layoffs commenced with several dozen employees being let go ahead of a company-wide announcement, and further job cuts are anticipated in the coming week, according to reports from Business Insider.
