Salesforce Inc (CRM.N) said it plans to cut jobs by 10% and close some offices, after rapid pandemic hiring left it with a bloated workforce amid an economic slowdown.
The cloud-based software firm said on Wednesday the job cuts would lead to about $1.4 billion to $2.1 billion in charges, while only about $800 million to $1 billion will be recorded in the fourth quarter.
Companies from Meta Platforms Inc (META.O) to Amazon.com Inc (AMZN.O) have slashed thousands of jobs in the past year, in preparation for a recession, expected as a result of aggressive interest rate hikes by global central banks to curb inflation.
Businesses that relied on cloud services during the pandemic are now trying to reduce expenses and are delaying new projects, hurting companies such as Salesforce and Microsoft Corp (MSFT.O).
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Salesforce 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.”
Salesforce had nearly 80,000 employees at the end of the third quarter, up from about 70,000 a year earlier.
The company said in its quarterly regulatory filing that it increased headcount “to meet the higher demand for services”.
Salesforce shares were up 3% on Wednesday. They lost roughly half their value in 2022 as Salesforce posted four consecutive quarters of slowing growth.
“It (the company) is certainly not alone as the sector has grappled with a demand environment that has meaningfully softened over the last 12 months,” William Blair analyst Arjun Bhatia said.
The move puts Salesforce in a good position to meet its 2026 target of 25% operating margin but the macro backdrop could pose risk to its $50 billion revenue target, Bhatia said.
“There is high likelihood of right-sizing by other software firms,” RBC Capital Markets analyst Rishi Jaluria said.