Cloud storage giant Dropbox today joined the fray of tech companies announcing layoffs. The company today announced that it would be laying off 16% of its staff, equivalent to about 500 employees, due to slowing growth, and -- in the words of CEO Drew Houston -- because "the AI era of computing has finally arrived."
These appear to be the first layoffs the company has made since January 2021, when it laid off 315 employees in the throes of the COVID-19 pandemic.
The SEC filing noted that the company will incur charges of approximately $37 million to $42 million in connection with layoffs, which will be recorded in Q2. Q1 results, which will be reported next Thursday, May 4, will be in-line or even above expectations, it added.
Ironically, even with the strong results, and the fact that Dropbox is profitable, Houston said the company is choosing to take a preemptive step to cut jobs and invest in new areas to keep up with the pace of change, given that growth is slowing.
"While our business is profitable, our growth has been slowing. Part of this is due to the natural maturation of our existing businesses, but more recently, headwinds from the economic downturn have put pressure on our customers and, in turn, on our business. As a result, some investments that used to deliver positive returns are no longer sustainable," he wrote.
The interesting thing is that he also cites AI as a major factor.
"Second, and more consequentially, the AI era of computing has finally arrived," he continued. "We’ve believed for many years that AI will give us new superpowers and completely transform knowledge work. And we’ve been building towards this future for a long time, as this year’s product pipeline will demonstrate."
For those who have been warning that AI will inevitably lead to the loss of more jobs, this will come as an alarming development. The more cynical might argue that it's an easy and timely excuse for cutting costs right now, to keep the market and investors optimistic that Dropbox is changing with the times and itself won't get disrupted in the next wave of innovation.
Houston said that impacted staff will be getting notified today and will be finished with work by tomorrow. The company had 3,125 employees prior to the move today.
More than 184,000 people have been laid off in the tech sector in 2023 across nearly 620 tech companies, according to the Layoffs.fyi tracker.
More to come.