Snap stock jumps after plan to cut 16% of its workforce citing AI
Omer Marques | SOPA Pictures | Light Rocket | Getty Images
explodeShares of the company rose on Wednesday after the company said it plans to cut up to 16 percent of its global workforce, citing AI-driven efficiencies.
The cut will affect about 1,000 staff and at least 300 open positions will be cut, CEO Evan Spiegel said in a letter to staff.
The stock was last up 6.3% in premarket trading.
Snap, the parent company of popular messaging platform Snapchat, plans to reallocate its resources to its highest priority initiatives, including improving net revenue profitability.
“Last fall, I described Snap as facing a critical moment that required a new way of working, faster and more efficiently, while also pivoting to profitable growth,” Spiegel wrote.
“We believe rapid advances in artificial intelligence are enabling our teams to reduce repetitive work, increase speed, and better support our community, partners, and advertisers,” Spiegel said. he added.
“We have already seen small teams leverage AI tools to drive meaningful progress on many key initiatives, including Snapchat+, improved ad platform performance, and efficiency improvements across our Snap Lite infrastructure.”
In a presentation to investors, the company said it was being squeezed by fast-moving startups as well as giants with larger resources. In the face of increased competition, Snap said it aims to increase profitability through “AI-driven transformation” by increasing workflows and having smaller teams.
The social platform plans to assign work to smaller, highly focused teams as it ramps up its AI agent capabilities. It reported that AI agents currently account for more than 65% of its new code and respond to more than 1 million queries per month.
“Today, we announced organizational changes to better align our resources with our highest priorities as we continue our trajectory toward profitable growth,” a Snap spokesperson told CNBC via email.
“These decisions are incredibly difficult, and we are committed to supporting our colleagues as they leave Snap through this transition.”
Restructuring costs are expected to be around $95 million to $130 million in the second quarter, while the layoff process is expected to continue in the third quarter and beyond as job eliminations are subject to local law requirements.
Spiegel said the layoffs would reduce the company’s annual cost base by more than $500 million by the second half of 2026. Snap estimates revenue for the first quarter will be $1.5 billion, up 12% year over year.
U.S. staff will receive email notifications within the next hour regarding next steps and can expect to receive four months of severance pay along with health insurance, benefits and career transition support. Snap’s North American team was asked to work from home.
