Snap is moving into another major workforce shake-up, cutting roughly 1,000 employees as it leans harder into artificial intelligence and faces mounting pressure from investors to slash costs and rethink its long-term strategy. The layoffs, announced Wednesday, represent about 16% of its full-time staff and mark one of the company’s most significant restructurings in recent years.

The decision underscores a fast-changing reality inside Silicon Valley: AI is no longer just a product feature, but a force reshaping how entire companies operate, hire, and survive.

AI-driven layoffs reshape Snap’s workforce strategy

Snap said advances in artificial intelligence are helping it streamline operations and operate with smaller teams, with AI generating more than 65% of new code as it assigns critical work to focused teams and AI agents. The company had about 5,261 full-time employees as of December.

The shift highlights how quickly automation is moving from experimental tool to core infrastructure inside major tech firms, directly reducing the need for large engineering and operational teams.

Investor pressure and activist demands intensify

The restructuring comes as activist investor Irenic Capital pushes Snap to go further, urging it to spin off or shut down its costly augmented reality glasses unit Specs. The fund has pointed to more than $3.5 billion in investment tied to the division while calling for broader cost reductions across the company.

Concerns are also mounting over whether Snap’s strategy can deliver long-term value in an increasingly competitive market.

"Cutting costs may appease an activist in the near term, and give long-suffering shareholders some relief, but whether it really leaves the company with a defensible business model and competitive position that it can defend, develop and turn into profits and cash flow is still unclear," said Russ Mould, investment director at AJ Bell.

COST SAVINGS

Snap expects to cut more than $500 million in annualized expenses by the second half of the year, driven significantly by the recent layoffs and broader efforts to reduce operating costs and stock-based compensation, CEO Evan Spiegel said. He asked North America employees to work from home on Wednesday.

The company is now part of a wider wave across the tech sector, where AI adoption and efficiency drives are fueling job cuts at scale. AI is reshaping the workforce by automating routine tasks, with 80 tech companies cutting about 71,440 jobs so far this year, according to data aggregator Layoffs.fyi.

Despite the reductions, Snap is still investing heavily in future bets, including its augmented reality glasses unit Specs, which it plans to launch this year. However, performance pressure continues to build.

Snap shares rose 5.8% following the announcement, though the stock remains down about 31% so far this year.

Revenue outlook and financial pressure

Snap expects first-quarter revenue to rise about 12% to roughly $1.53 billion, largely in line with Wall Street expectations, according to data compiled by LSEG.

The company declined to comment on whether preliminary results include revenue from the $400 million Perplexity deal announced last year. Snap said in February that the companies "have yet to mutually agree on a path to a broader rollout".

Snap continues to trail some of its larger rivals in recent quarters, a trend advisory firm Madison and Wall does not expect to reverse.

At the same time, the company forecast adjusted core profit of about $233 million for January-March, higher than Wall Street expectations of $186.8 million.

Snap expects $95 million to $130 million in layoff-related charges, mostly in the second quarter, according to a regulatory filing.

The company is scheduled to report quarterly results on May 6, a report that will offer investors a clearer view of whether its aggressive cost-cutting and AI-driven transformation are stabilizing its business or signaling deeper structural pressure ahead.