Salesforce plans to cut its workforce by 10% and close some offices, saying it needs to cut costs after rapid pandemic hiring left it with “too many people” amid an economic slowdown, sending its shares up 5%.
The cloud-based software company said on Wednesday it expects between $1.4 billion and $2.1 billion in charges due to the job cuts, of which about $800 million to $1 billion will be recorded in the fourth quarter.
Companies from Meta Platforms to Amazon have in the past year shrunk their employee base to prepare for a deep downturn as global central banks have aggressively raised interest rates to tame stubbornly high inflation.
Businesses that relied on cloud services during the pandemic are now trying to reduce expenses through job cuts or delaying new projects, hurting companies such as Salesforce and Microsoft.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” co-Chief Executive Officer Marc Benioff said in a letter to employees.
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” Benioff added.
Salesforce had 73,541 employees at the end of January last year, a 30% jump from 2021.
The company’s growth has slowed during the past four quarters, with Salesforce posting its weakest revenue increase in the third quarter.
“Companies will want to show voting shareholders that they can once again deliver value through investment returns even amidst a downturn,” said Joshua White, a finance professor at Vanderbilt University. “Layoffs will be a big part of that equation.”
Salesforce said affected employees in the United States will receive a minimum of about five months pay, health insurance and other benefits.