What just happened? In a depressingly familiar turn of events, Dropbox is laying off 20% of its employees – 528 people – due to slowing demand and economic factors. The announcement comes just over a year after it laid off 500 workers, a move it blamed on its new focus on AI and the shaky economy.
Drew Houston, Dropbox's CEO, wrote in a memo to staff that the company is in a transitional period, adding that its main file syncing and sharing business "has matured, and we've been working to build our next phase of growth with products like Dash," its AI-powered productivity tool that has a universal search as a main feature.
Houston says navigating the company's transition while maintaining its current structure and investment levels is no longer sustainable. The CEO goes on to point the finger at softening demand and macro headwinds in Dropbox's core business, while also highlighting an overly complex organizational structure that has excess layers of management.
"And while I'm proud of the progress we've made in the last couple years, in some parts of the business, we're still not delivering at the level our customers deserve or performing in line with industry peers," Houston wrote. "So we're making more significant cuts in areas where we're over-invested or underperforming while designing a flatter, more efficient team structure overall."
In April 2023, Dropbox announced it was laying off around 500 employees, the equivalent of 16% of its workforce.
Houston also mentions that the market is moving toward where Dropbox has made its biggest bets – I.e., AI products such as Dash. He says this underscores the need for even more urgency, even more aggressive investment, and decisive action.
In an SEC filing, Dropbox estimates that the layoffs will incur total cash expenditures of $63 million to $68 million, mostly from severance payments, employee benefits, and related costs.
All impacted employees will be eligible for sixteen weeks of pay, with one additional week of pay for each completed year of tenure at the company. They will also receive their Q4 equity vesting and be eligible for a pro-rated payment equivalent to their 2024 bonus target.
Dropbox reported quarterly revenue of $634.5 million in Q2 2024. The 1.9% year-over-year increase represented the lowest quarterly growth in the company's history, while its shares lost more than 20% of their value year to date in August. The number of paid users increased by 63,000 in the quarter, a fraction of its more than 18 million-strong userbase.
According to layoffs.fyi, 484 tech companies have laid off a total of 142,532 people (Dropbox's recent announcement included) so far this year.
