Takeaways
- Spotify The streaming music service already cut its workforce in January and June.
- CEO Daniel Ek laid off 17% of his workforce in a third round of job cuts .
- CEO Daniel Ek blamed a changing economic environment that led to slower growth and higher investment costs.
Spotify Technology (SPOT) shares climbed by more than 7% in early trading Monday as the streaming music service reduced its workforce in its latest cost-cutting effort.
Spotify CEO Daniel Ek wrote in a letter to employees saying the job cuts would result in a workforce reduction of about 17%, or about 1,500 employees. Ek explained that the move was necessary because economic growth “has slowed significantly and capital has become more expensive.”
He noted that the company had debated whether to make more modest reductions over the next two years, but added that “given the gap between our financial targets and our current operational costs , I decided that substantial action to resize our costs was the best option to achieve our objectives.”
Ek pointed out that Spotify took advantage of capital costs in 2020 and 2021 to expand its operations, but now “we find ourselves in a very different environment.” He said that despite efforts to reduce spending this year, “our cost structure relative to where we need to be is still too high.”
This is of the third layoff for the company this year. Spotify cut around 600 employees in January and around 200 in June.
The news sent shares from Spotify Technology at its highest level in almost two years.
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Source: investopedia.com