On Wednesday, Snap’s shares jumped by 7% after CEO Evan Spiegel revealed plans to cut around 1,000 jobs and integrate artificial intelligence into various roles.
Spiegel, whose net worth is approximately $2.3 billion according to Forbes, expressed his deep regrets in a staff memo regarding the layoffs, which represent about 16% of the company’s workforce.
Interestingly, the firm is also looking to fill over 300 open positions.
“These changes, while tough, are essential for unlocking Snap’s long-term potential. We believe that advancements in artificial intelligence can help our teams minimize repetitive tasks, enhance efficiency, and better serve our communities, partners, and advertisers,” Spiegel explained in the memo.
He added that small teams have already begun using AI tools to make significant progress in various initiatives, such as Snapchat+, improving their ad platform’s performance, and optimizing Snap Lite infrastructure.
After this news broke, Snap employees in North America were instructed to work from home that Wednesday, with those affected learning about their status via email.
The company has been facing stiff competition from rivals like Instagram and TikTok, having employed about 5,261 full-time workers at the end of the previous year.
This round of job cuts comes in response to pressure from activist investor Irenic Capital Management, which has been advocating for a more streamlined operation.
Irenic has suggested that Snap consider divesting or shutting down its augmented reality glasses division, Spex, along with implementing other cost-reduction strategies.
Even with the uptick in stock during intraday trading on Wednesday, Snap’s shares are still down roughly 26% year-to-date.
Spiegel indicated that Snap is aiming for over $500 million in cost savings by the latter half of this year, which should pave the way for clearer profitability.
Expectations are that Snap will release its quarterly financial results on May 6th.
There’s a growing unease that the growth of advanced AI technologies will significantly disrupt the U.S. job market.
For instance, in February, financial tech company Block announced it would reduce its workforce by 40%, translating to over 4,000 jobs, as it fully adopted AI tools.
At that time, Block’s CEO Jack Dorsey, also known as the co-founder of Twitter, predicted that many companies would follow suit in the coming months.
“I think that in the next year, most companies will arrive at similar conclusions and make corresponding structural adjustments. Personally, I’d prefer to do so on our own terms rather than be compelled into it,” Dorsey noted in an open letter.
