Social media app Snapchat is to cut 1,000 jobs and ramp up its use of artificial intelligence (AI) in an attempt to end years of heavy losses.
Snap, the company behind the video and messaging app, will lay off 16pc of its full-time staff and close more than 300 open roles.
In a memo to staff, Evan Spiegel, the company’s chief executive, said the tech firm was stepping up its use of AI in an effort to become profitable.
He wrote: “While these changes are necessary to realise 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.”
Snap, which has just over 5,000 employees, expects to save around $500m (£368m) from the sweeping cuts. It forecast restructuring costs of up to $130m, the majority of which will fall in the second quarter.
The mass lay-offs come after the company lost another $460m last year, bringing its total accumulated losses since it was founded in 2011 to almost $14bn.
Mr Spiegel has been under pressure from activist investors to restructure the business and replace swathes of staff with AI bots.
Last month, investment firm Irenic wrote to Mr Spiegel, insisting that “AI can and should replace many existing roles”.
The letter from Irenic co-founder Adam Katz, a former adviser at Elliott Management, said Snapchat’s market valuation of about $7bn was “comically small” compared to rivals.
Snap did not provide details of exactly which roles will be affected. However, it said more than 65pc of new code is now generated by AI and that its code review agent had identified more than 7,500 bugs. The company also answers more than one million questions per month through an automated agent.
It suggests software engineers and customer service staff are likely to be among the employees affected by job cuts.
In a presentation to investors, Snap said it will overhaul how it works using a so-called “jobs to be done” framework aimed at improving efficiency. This will map crucial work to streamlined teams as well as identify which tasks can be done by “increasingly capable” AI agents.
Snap said AI would free up teams to focus on higher-value work and speed up new product development.
Mr Spiegel has previously described Snap as facing a “crucible moment” as it is trapped between much larger tech giants and smaller, more nimble start-ups.
The company, which aims to reach one billion daily active users, outlined plans to reach profitability by targeting higher-margin advertising and building its subscription base. Users can pay £3.99 a month for access to its premium tier, Snapchat+, which offers exclusive features.
Snap is also under pressure to spin off its smart glasses business, Specs, into a separate business that can raise its own funding.
Irenic called on the company to spin off or shut down Specs, which has struggled to attract mainstream interest and faces stiff competition from rival Meta.
US technology businesses have disclosed thousands of job cuts so far this year, telling staff that roles have to go as AI tools such as ChatGPT improve the efficiency of programmers and white-collar office workers.
In March, Block, the payments and cryptocurrency business run by Twitter founder Jack Dorsey, announced it would be cutting 40pc of jobs – 4,000 people – in response to new AI tools.
But companies have been accused of “AI washing” when announcing lay-offs and using claims of AI productivity to mask problems such as vast losses or overhiring.
According to Irenic’s letter, Snap’s workforce has grown from about 3,000 in 2020 to 5,200 today. The shareholder said: “Like many of your peers, you over-hired. Unlike your peers, you haven’t course corrected.”
Snap previously cut 20pc of jobs in 2022 and a further 10pc in 2024 as it struggled to stem mounting losses. Despite having close to one billion users on its messaging app, the company has struggled to turn a profit from digital advertising or subscriptions.
The company’s stock has plunged more than 90pc since peaking in 2021 and is down more than 80pc on its float price from 2011. It forecast revenues of $1.5bn in the first quarter, up 12pc on last year, while adjusted earnings are estimated to be $233m.
A Snap spokesman said: “Today we announced organisational changes to better align our resources behind our highest priorities as we continue our pivot toward profitable growth.
“These decisions are incredibly difficult, and we are committed to supporting our colleagues who are leaving Snap through this transition.”
