Snap (NYSE: SNAP) stock fell almost 2% on Monday after the company revealed plans to cut 10% of its workforce amidst ongoing layoffs.
Snap announced Monday that it plans to lay off approximately 528 employees, representing 10% of its global workforce. This move indicates that the wave of layoffs in the tech industry witnessed in 2023 might continue as companies deal with economic instability.
Snap, the parent company of the photo messaging app Snapchat, has historically found it challenging to convert its popularity among younger demographics into steady revenue growth and stand up against larger competitors such as Meta Platforms, the owner of Facebook. Meta issued its inaugural dividend on Thursday, following staff reductions last year.
Snap is scheduled to release its fourth-quarter results on Tuesday.
Analysts warn that these layoffs signal trouble for Snap’s business. The company’s decision to trim its workforce may be an attempt to please investors, who have rewarded its competitors for similar cost-cutting measures.
Jasmine Enberg, principal analyst at research firm Insider Intelligence, said,
“The layoffs don’t bode well for the state of Snap’s business.”
He added,
“Snap is likely trying to garner some goodwill with investors, who rewarded its competitor for its cost-cutting measures.”
Snap’s Restructuring Goals
Snap says they’re restructuring to focus on their main goals and make sure they can keep growing. But this move isn’t cheap. The company foresees pre-tax expenses of $55-75 million, mainly for severance, associated costs, and other charges, with $45-55 million anticipated as future cash outlays. Most of this spending will happen in the first quarter of 2024.
This decision by Snap aligns with recent layoffs across tech and media sectors, with Amazon, Alphabet, and others also making cuts. Remote workers at Snap are bearing the brunt of this, as the company has been urging employees to return to the office four days a week since last year.
Since the beginning of this year, over 32,000 workers from 122 tech companies have lost their jobs. And in 2023, the tech industry saw the most layoffs across all sectors. Microsoft alone cut over 10,000 jobs last year. This shows that even tech giants aren’t immune to economic challenges.
Snap (NYSE: SNAP) Stock Price Action
SNAP stock declined 1.76% to close at $16.75 on Monday. The traders had exchanged hands with 37,143,537 (37.14 million) shares compared to the average daily trading volume of 23.27 million.
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