Snap to cut 1,000 jobs after activist pressure, bets on AI efficiency

[BENGALURU] Snap will lay off about 1,000 employees, including 16 per cent of full-time staff, the company said on Wednesday (Apr 15), becoming the latest tech firm to ramp up AI adoption to streamline operations and shift towards leaner teams.

The move, which also includes the closure of more than 300 open roles, comes weeks after Irenic Capital Management pushed the Snapchat parent to optimise its portfolio and improve performance.

The activist investor has an economic interest of about 2.5 per cent in the company. Snap said advances in artificial intelligence are helping it streamline operations and operate with smaller teams, with AI generating more than 65 per cent of new code as it assigns critical work to focused teams and AI agents. The company had about 5,261 full-time employees as of December.

Shares rose about 9 per cent in premarket trading.

The stock has fallen about 31 per cent so far this year. The company has invested heavily in its augmented reality glasses unit Specs, and plans to launch the product this year. However, Irenic Capital has urged it to spinoff or shut down the cash-burning business, citing more than US$3.5 billion in investment and roughly US$500 million in annual losses. The investor also called for 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, it is still unclear,” said Russ Mould, investment director at AJ Bell.

Snap expects to cut more than US$500 million in annualised expenses by the second half of the year through the layoffs, CEO Evan Spiegel said, as part of a broader plan to reduce operating costs and stock-based compensation. He also asked North America employees to work from home on Wednesday.

Artificial intelligence is reshaping the workforce by automating routine tasks, with more than 80 tech companies cutting about 71,440 jobs so far this year, according to data aggregator Layoffs.fyi.

Snap expects first-quarter revenue to rise about 12 per cent to roughly US$1.53 billion, largely in line with Wall Street expectations, according to data compiled by LSEG.

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The social media firm forecast adjusted core profit of about US$233 million for January-to-March quarter, higher than Wall Street expectations of US$186.8 million.

The company expects US$95 million to US$130 million in layoff-related charges, mostly in the second quarter, according to a regulatory filing.

Snap is set to report quarterly results on May 6 after markets close. REUTERS