Cloud storage giant Dropbox is set to lay off 500 employees, equivalent to 16% of its workforce, due to slowing growth and the rise of AI in computing. According to CEO Drew Houston, AI technology has now reached a point where it can transform knowledge work and give companies new superpowers.
Despite the fact that Dropbox is profitable and Q1 results are expected to be in-line or even above expectations, 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.
The latest cull comes after the company laid off 315 employees in January 2021 during the COVID-19 pandemic. Dropbox is expected to record charges of $37 million to $42 million in connection with the layoffs, which will be recorded in Q2.
Houston claims that part of the slowdown is due to the natural maturation of existing businesses, but headwinds from the economic downturn have also put pressure on customers and the company’s bottom line. As a result, some investments that used to deliver positive returns are no longer sustainable.
For many, the news of AI being a major factor in the job losses will be alarming. With over 184,000 people laid off in the tech sector across nearly 620 companies in 2023, according to the Layoffs.fyi tracker, fears of further job losses due to AI are on the rise. However, the more cynical might argue that the rise of AI is simply a convenient excuse for cutting costs right now, to keep investors optimistic and Dropbox changing with the times.
Impacted staff will be notified today and will finish work by tomorrow. The company had 3,125 employees prior to the move. While Dropbox is not the first tech company to announce layoffs this year, it is the latest to do so as the industry continues to feel the effects of the COVID-19 pandemic and the rise of new technologies such as AI.