Snap to Cut 1,000 Jobs, Citing AI Efficiency

Snap announced it will lay off about 1,000 employees, or 16% of its full-time staff, and close more than 300 open roles, citing advances in artificial intelligence that allow it to operate with smaller teams.

Layoffs and Cost-Cutting Targets

Snap said it would lay off about 1,000 employees, representing 16% of its full-time staff, as the social media company seeks to lower costs and use AI to boost productivity with smaller teams. The company also plans to close more than 300 open roles. Snap 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 the year, according to CEO Evan Spiegel in a letter to employees. The company said it is lowering operating expenses and stock-based compensation as part of a wider cost-cutting plan.

AI as a Stated Factor

Snap said advances in artificial intelligence are allowing it to streamline operations, reduce repetitive work, and operate with smaller teams. The company stated that AI is enabling it to reduce repetitive work and boost productivity with fewer employees. Snap also revealed that over 65% of its new code is already AI-generated, signaling a shift toward a new operating model of human-AI collaboration.

Financial Expectations and Charges

Snap expects first-quarter revenue to rise about 12% to roughly $1.53 billion, 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 company 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.

Activist Investor Pressure

The move 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. Irenic urged Snap to spin off or shut down Specs, its augmented reality smart glasses business. 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 broader cost cuts, including through layoffs.

Snap 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.

Market Reaction and Employee Support

Shares of the social media company rose more than 10% in premarket trading. The stock has fallen about 31% so far this year. U.S.-based affected employees will be offered four months of severance pay, continued healthcare coverage, accelerated equity vesting, and career transition support. North American employees were asked to work from home on the Wednesday of the announcement.

Snap joins a growing list of companies announcing job cuts in the tech industry.