Snap Inc announced on Wednesday that it will lay off 20% of its workforce and discontinue projects as high inflation and a deteriorating economy wreak havoc on the advertising industry.
Snap estimates that the cuts will save the company $500 million in annual costs.
Snap shares were up 9% as of midday trading, reverberating throughout the sector. Shares of Facebook parent company Meta Platforms Inc and Pinterest Inc increased by about 6%.
The company stated that it will concentrate on increasing sales and the number of Snapchat users.
According to Paolo Pescatore, an analyst at PP Foresight, the company’s “clear and defining action” to refocus its business has reassured investors.
Because Snap is usually the first to report quarterly earnings or provide business updates, analysts and investors have viewed Snap as an early indicator for trends affecting other social media platforms.
Snap’s May warning that it would miss revenue targets due to worsening economic conditions triggered a sell-off in social media stocks.
Stock in the Santa Monica, California-based Snap fell 2.5% to $10 on Tuesday after The Verge reported Snap’s layoff plans and AdAge reported the departure of two top advertising executives.
The company stated that it will concentrate on increasing sales and the number of Snapchat users.
