Snap to slash workforce by 16%, saying AI has reduced need for repetitive work

By Tomi Kilgore

Snapchat parent's stock surges as investors cheer cost savings through job cuts and upbeat outlook on profitability

Snap's stock surges after Snapchat's parent said it was cutting 16% of its workforce, but also provided an upbeat sales outlook.

Shares of Snap surged in Wednesday premarket trading after the Snapchat parent said it would lay off 16% of its full-time employees in an effort to cut costs and reduce workforce overlap.

The company (SNAP) also provided an update on its first-quarter results, including upbeat outlooks for sales and underlying profitability.

Meanwhile, Wall Street continued its trend of cheering news of large layoffs in the technology sector, which investors see as a sign of companies embracing AI to boost employee productivity.

Snap's stock jumped 6.8% in premarket trading, putting it on track to open more than 50% above the March 27 record closing low of $3.93.

CEO Evan Spiegel wrote in a letter to employees that the job cuts would affect about 1,000 people, in addition to the closing of more than 300 open positions. The move comes after Spiegel said last fall that the company was facing a "crucible moment," which required a new way of working that's faster and more efficient as it looks to pivot toward profitable growth.

"While these changes are necessary to realize Snap's long-term potential, we believe that rapid advancements in artificial intelligence enable our teams to reduce repetitive work, increase velocity, and better support our community, partners, and advertisers," Spiegel wrote.

He said the changes the company is making are expected to lower the annualized cost base by more than $500 million by the second half of this year.

The company said it would also book charges of $95 million to $130 million for severance and related costs, with most of the charges expected in the second quarter.

For the first quarter, Snap said it expects revenue of approximately $1.53 billion, which is up 12% from a year ago and above the average analyst estimate compiled by FactSet of $1.52 billion.

The company also expects adjusted earnings before interest, taxes, depreciation and amortization - a measure of underlying profitability - of about $233 million, which would beat the current FactSet consensus of $184.5 million.

While the company has been profitable on an adjusted Ebitda basis over the past 10 quarters, on net income basis, the company has only posted a profit in two of the past 10 quarters.

Despite the recent bounce, the stock has tumbled 30.6% so far this year through Tuesday, while the S&P 500 index SPX has gained 1.8%.

-Tomi Kilgore

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04-15-26 0709ET