Shares in Snap jump on plan to axe 16% of workforce
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The news: Shares in US social media platform Snap jumped over 10% in pre-market trading, after the company announced plans to cut as much as 16% of its global workforce.
The numbers: Shares were up 10.7% to USD6.20 per share at 7:06am EST (9:06pm AEST) before US market open on Wednesday.
The job cuts will impact approximately 1,000 staff members in addition to closing 300 open roles.
The context: In a memo circulated to Snap employees on Wednesday, CEO Evan Spiegel said the reductions were part of a plan to lower costs and achieve profitability.
He said the company is prioritising investments he believes are most likely to create long term value and expects to reduce Snap’s “annualized cost base by more than USD500 million ($700.5 million) by the second half of 2026, helping to establish a clearer path to net-income profitability.”
Spiegel said the company believes rapid advancements in AI “enable our teams to reduce repetitive work, increase velocity, and better support our community, partners, and advertisers.
“We have already witnessed small squads leveraging AI tools to drive meaningful progress across several important initiatives, including Snapchat+, enhanced ad platform performance, and efficiency improvements in our Snap Lite infrastructure.”
The memo, which requested that all members of the North American team work from home on Wednesday, said the impacted employees will receive an email within an hour after the memo was shared.
The news comes just weeks after activist investor Irenic Capital Management built a position in Snap, calling for changes to improve financial performance which included workforce cuts.
The sources: Business Insider, Bloomberg
