According to TechCrunch, Dropbox is reducing its workforce by 20% as the company undergoes a significant transitional period. CEO Drew Houston announced in a letter to staff that the layoffs would affect 528 employees. Houston stated that the goal is to cut areas where Dropbox has over-invested and create a more efficient team structure. He took full responsibility for the decision and expressed regret to those impacted. Houston emphasized the need for urgent and aggressive investment due to the fast-moving market and significant investor interest in the space.
A filing with the SEC revealed that Dropbox expects to incur total cash expenditures of $63 million to $68 million for the layoffs, mainly in severance and benefits, with $47 million to $52 million recognized as incremental expenses. Most payouts will occur in Q4 2024, with the remainder in H1 2025. Affected employees will receive severance, equity, transition payments, healthcare benefits, and job placement services.
Dropbox has faced challenges in recent months, losing market share to competitors like Box and Google Drive. In its latest fiscal quarter, the company added only 63,000 new users, a small fraction of its 18 million user base, and saw revenue growth slow to low single digits. Q2 marked the lowest growth quarter in Dropbox's history, with a 1.9% year-over-year increase to $634.5 million. As of August, the company's shares had declined by over 20% year to date. Houston acknowledged the softening demand and macroeconomic headwinds affecting the core business and admitted that some parts of the business are not performing at the desired level.
The layoffs follow a previous reduction of roughly 500 employees last year and coincide with Dropbox's increased investment in AI technologies. The company recently enhanced its AI-powered smart organization and search tool, Dropbox Dash, with new enterprise-focused features, including data governance controls. Houston mentioned that Dropbox would provide more details on high-level changes and its 2025 strategy in the coming days.