In a Thursday message to Dropbox employees, cofounder and CEO Drew Houston announced the decision to cut down the company’s workforce by 16%, or 500 employees, blaming AI in forcing a shift in strategies.
While the company has been profitable, Houston wrote that growth has slowed, leading some investments to no longer be profitable. But “more consequentially,” Houston pointed to recent AI developments as signaling significant changes in what the company needs to function and deliver positives.
“In an ideal world, we’d simply shift people from one team to another. And we’ve done that wherever possible. However, our next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development,” Houston wrote.
According to an SEC filing, Dropbox plans to “strategically reinvest” savings from the job cuts into future growth initiatives. The company expects to incur charges of approximately $37 million to $42 million in the reduction, primarily in the form of severance payments and employee benefits.
Although the company has been building toward a future in which AI transforms work, Houston wrote that recent developments in the industry have expanded the potential market and “alerted” competitors to the same opportunities.
Houston also pointed to general areas where investments haven’t performed as expected, leading to cuts in those areas “in order to free up investment in our future growth.” More specifically, Dropbox is looking to consolidate its Core and Document Workflows businesses and refocus its business teams.
“I’m truly sorry that as a result of these decisions, we have to part ways with Dropboxers and valued teammates who have made many contributions to the company,” he wrote.
The layoffs are the latest in a string of tech layoffs in the past year, including at Lyft, Apple, and Meta, among others. Since the beginning of 2023, more than 184,000 employees at tech companies have been laid off. In a particularly turbulent economic stage, more and more businesses are being forced to cut down on their workforce.
For Dropbox, Houston said the changes are necessary for the company’s long-term health and future.
“These transitions are never easy, but I’m determined to ensure that Dropbox is at the forefront of the AI era, just as we were at the forefront of the shift to mobile and the cloud. We’ll need all hands on deck as machine intelligence gives us the tools to reimagine our existing businesses and invent new ones,” he wrote. “And I’m committed to doing everything in my power to best position ourselves for the future and unlock our full potential.”
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