MW Dropbox to cut 20% of workforce as it moves to boost growth

By Ciara Linnane

Online-storage platform to lay off 528 workers as it backs revenue guidance for the third quarter

Dropbox Inc.'s stock rose 3.9% Wednesday after the online-storage platform said it expects third-quarter earnings to meet or beat guidance for revenue and other metrics but also said it's cutting about 20% of its global workforce in an effort to streamline its structure.

The company's (DBX) most recent 10-K annual report filing with the Securities and Exchange Commission shows its had 2,693 workers as of Dec. 31, 2023, meaning some 528 people will be let go.

The company is expecting to spend $63 million to $68 million on severance payments and other benefits and to book charges of $47 million to $52 million, the bulk of which will be recognized in the fourth quarter.

"As we've shared over the last year, we're in a transitional period as a company. Our FSS business has matured, and we've been working to build our next phase of growth with products like Dash," Chief Executive Drew Houston said in a letter to employees that was included in a regulatory filing.

"However, navigating this transition while maintaining our current structure and investment levels is no longer sustainable," he said.

Dropbox is still seeing softening demand and macroeconomic headwinds in its core business, Houston said. But the company has also heard from its own workers that its organizational structure is "overly complex," with layers of management that are slowing it, he said.

"And while I'm proud of the progress we've made in the last couple of years, in some parts of the business, we're still not delivering at the level our customers deserve or performing in line with industry peers. So we're making more significant cuts in areas where we're over-invested or underperforming while designing a flatter, more efficient team structure overall," Houston said.

Regarding third-quarter earnings, which are scheduled to be released on Nov. 7, the company expects revenue, constant-currency revenue and adjusted operating margin to be at or above guidance provided on Aug. 8.

At the time, Dropbox said it expected revenue to range from $635 million to $638 million. Constant-currency revenue was also pegged at $635 million to $638 million, while adjusted operating margin was forecast at about 32%.

The stock has fallen 9% in the year to date, while the S&P 500 SPX has gained 22%.

-Ciara Linnane

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October 30, 2024 10:12 ET (14:12 GMT)

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