Dropbox to let go 20% of its workforce amid growth push

Dropbox Inc. is letting go 528 employees, or 20% of its workforce, in a bid to advance its revenue growth initiatives.

Chief Executive Officer Drew Houston disclosed the move in a blog post published today. The announcement comes about 18 months after the file sharing provider let go a similar number of workers in a separate round of layoffs. At the time, Dropbox stated that it was shifting resources to the development of artificial intelligence features.

In today’s blog post, Houston detailed that there are three main factors behind the company’s latest job cuts.

The first is the slowing growth in its core FSS, or file sync and share, business. Dropbox’s revenue grew only 1.9% year-over-year last quarter, to $634.5 million. The number of users with paid subscriptions to its file sharing platform rose by 16,000 to 18.22 million.

Houston detailed that the second factor behind the workforce reduction is the company’s growth strategy. “Our FSS business has matured, and we’ve been working to build our next phase of growth with products like Dash,” he wrote in the blog post. “However, navigating this transition while maintaining our current structure and investment levels is no longer sustainable.”

Dash is an artificial intelligence tool that Dropbox introduced last year. It enables users to centrally search for files across Dropbox and third-party cloud applications such as Salesforce. Earlier this month, the company debuted a new version of Dash that offers AI-generated file summaries and an expanded set of cybersecurity controls.

In parallel with its new product initiatives, Dropbox continues to enhance its core file sharing platform. The company recently rolled out an end-to-end encryption feature that ensures only the sender and recipient of a shared file can access it. The same update introduced a setting that allows customers to scramble data using their own encryption keys. 

According to Houston, another motivation behind the restructuring initiative is a need to streamline the company’s business operations. He wrote that many employees believe Dropbox’s “organizational structure has become overly complex, with excess layers of management slowing us down.”

Staffers impacted by the layoffs will receive 16 weeks of severance pay plus one more week’s worth for every year they’ve worked at Dropbox. The company will also provide healthcare benefits, equity vesting and bonuses along with resources such as outplacement support.

Dropbox disclosed in a regulatory filing that the restructuring initiative is expected to cost between $63 million and $68 million. The company expects to incur the bulk of the charge by the end of the year. Additionally, the filing detailed that Dropbox expects to meet or exceed the financial guidance it released in August for its fiscal third quarter.

Image: Dropbox