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 that it expects between $1.4B and $2.1B in charges due to the job cuts, of which about $800M to $1B will be recorded in the fourth quarter.
Salesforce had nearly 80,000 employees at the end of the third quarter, up from about 70,000 a year earlier. Co-Chief Executive Officer Marc Benioff said United States employees being released will receive nearly five months of pay, health insurance, career resources, and other benefits.
Salesforce lost roughly half its value in 2022 as it posted four consecutive quarters of slowing growth. Salesforce has committed to a 25% operating margin by calendar year 2025. If hit, it would mark a notable increase from 2022's goal of 20.4%.
Why it matters
Companies from Meta 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. Adding to this 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.