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

FILE - In this March 2, 2017 file photo, a banner for Snap Inc. hangs from the front of the New York Stock Exchange, in New York. (AP Photo/Mark Lennihan)

Snap said on Wednesday it would lay off about 1,000 employees, including 16 per cent of its full-time staff, as the social media firm looks to lower costs and leverage AI to boost productivity with smaller 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 optimize its portfolio and improve performance. The activist investor has an economic interest of about 2.5% in the company.

Snap said advances in artificial intelligence are allowing it to streamline operations, reduce repetitive work, and operate with smaller teams, forming part of a broader push to improve efficiency.

Shares of the social media company rose more than 10 per cent in premarket trading. The stock has fallen about 31 per cent so far this year.

Snap, which joins a growing list of companies announcing job cuts in the tech industry, had about 5,261 full-time employees as of December.

With the layoffs, Snap expects to reduce its annualized expenses by more than $500 million by the second half of this year, CEO Evan Spiegel said in a letter to employees.

He also asked employees in Snap’s North America team to work from home on Wednesday.

The company said it is lowering operating expenses and stock-based compensation as part of a wider cost-cutting plan.

Snap said it expects first-quarter revenue to rise about 12% to roughly $1.53 billion, which is largely in line with the average of analysts’ estimates, according to data compiled by LSEG.

It forecast adjusted core profit of about $233 million for January-March, higher than Wall Street expectations of $186.8 million.

The social media firm expects $95 million to $130 million in charges from its layoffs, mostly for severance and related costs. It expects the majority of the costs to be incurred in the second quarter, according to a regulatory filing.

The company has been pouring resources into its independent subsidiary, Specs, for augmented reality smart glasses, and is gearing up to launch the product for consumers this year. But its bigger rival, Meta, already leads the market.

Irenic Capital Management urged Snap to spin off or shut down Specs.

The activist investor said the business has absorbed more than $3.5 billion in investment and is burning roughly $500 million in cash annually, while also recommending the company pursue broader cost cuts, including through layoffs.

(Reporting by Jaspreet Singh and Akash Sriram in Bengaluru; Editing by Leroy Leo)