Salesforce to Reduce Workforce by 10% After Over-Hiring, Reports Reuters

Salesforce to Cut Jobs by 10% Amid Economic Slowdown

Salesforce Inc has announced plans to reduce its workforce by 10% and close some offices, a move prompted by a rapid hiring spree during the pandemic that has left the company with excess staff in the face of an economic downturn.

On Wednesday, the cloud-based software company stated that the job cuts would incur charges ranging from approximately $1.4 billion to $2.1 billion, with about $800 million to $1 billion expected to be recorded in the fourth quarter.

In the past year, numerous companies, including Meta Platforms and Amazon, have laid off thousands of workers as they brace for an anticipated recession. This economic challenge is largely attributed to aggressive interest rate increases enacted by central banks around the world to combat inflation.

Organizations that heavily invested in cloud services during the pandemic are now focusing on cutting costs and postponing new projects, affecting firms like Salesforce and Microsoft.

"The environment remains challenging, and our customers are taking a more measured approach to their purchasing decisions," stated Marc Benioff, co-CEO of Salesforce, in a letter to employees. He acknowledged that, due to accelerated revenue growth during the pandemic, the company had hired too many employees leading into the current economic challenges.

At the end of the third quarter, Salesforce employed nearly 80,000 people, up from about 70,000 the previous year, as it expanded its workforce to address the increased demand for services.

Despite the announcement, shares of Salesforce rose by 3% on Wednesday, although the company’s stock lost nearly half of its value in 2022 due to four consecutive quarters of decelerating growth.

"The company is certainly not alone; the sector has faced a notably weakened demand environment over the past year," commented Arjun Bhatia, an analyst at William Blair.

This strategic decision positions Salesforce to potentially achieve its 2026 goal of a 25% operating margin, though analysts note that the current macroeconomic conditions could jeopardize its $50 billion revenue target. Rishi Jaluria, an analyst at RBC Capital Markets, highlighted the likelihood of similar workforce adjustments across other software companies as the industry adapts to these economic realities.