Snap's stock jumps on plans to axe 16% of its workforce citing AI efficiencies

Snap's shares jumped on Wednesday after the company announced plans to slash up to 16% of its global workforce, citing AI-driven efficiencies.

CEO Evan Spiegel said in a letter to staff that the reduction would affect around 1,000 members of staff and that at least 300 open positions would be closed.

The stock was last up 6.3% in premarket trading.

Snap, the parent company of popular messaging platform Snapchat, is planning to reallocate resources to its highest priority initiatives, including increasing its net-income profitability.

"Last fall, I described Snap as facing a crucible moment, requiring a new way of working that is faster and more efficient, while pivoting towards profitable growth," Spiegel wrote.

"We believe that rapid advancements in artificial intelligence enable our teams to reduce repetitive work, increase velocity, and better support our community, partners, and advertisers," Spiegel added.

"We have already witnessed small squads leveraging AI tools to drive meaningful progress across several important initiatives, including Snapchat+, enhanced ad platform performance, and efficiency improvements in our Snap Lite infrastructure."

In a presentation to investors, the company said it's being squeezed by giants with greater resources as well as fast-moving startups. In the face of rising competition, Snap said it aims to increase profitability via "AI-driven transformation," by augmenting workflows and having smaller teams.

The social platform plans to assign work to smaller, highly focused teams while increasing AI agent capabilities. It reported that AI agents are already generating over 65% of its new code and responding to over 1 million queries per month.

"Today we announced organizational changes to better align our resources behind our highest priorities as we continue our pivot toward profitable growth," a Snap spokesperson told CNBC via email.

"These decisions are incredibly difficult, and we are committed to supporting our colleagues who are leaving Snap through this transition."

Restructuring costs are expected to be around $95 million to $130 million in the second quarter, with the layoff process expected to continue into the third quarter and beyond due to role elimination being subject to local law requirements.

Spiegel said that the layoffs would reduce the company's annualized cost base by more than $500 million by the second half of 2026. Snap is forecasting revenue of $1.5 billion for the first quarter, an annual increase of 12%.

U.S. staff members will receive email notifications within the next hour regarding the next steps, and can expect to receive four months of severance pay with healthcare coverage, equity vesting, and career transition support. Snap's North American team was asked to work from home.