Dropbox lays off 20% of its workforce as CEO blames ‘excessive management’ for sluggish growth.

Dropbox dropped a large portion of its head count.

Chief executive Drew Houston told employees the company was cutting 20% ​​of its workforce, the equivalent of 528 roles, in a letter published Wednesday.

“As CEO, I take full responsibility for this decision and the circumstances that led to it, and I deeply apologize to those affected by this change,” Houston wrote, adding that the company is “in a period of transition.”

Houston continued, “Maintaining our current structure and investment levels is no longer sustainable. We continue to see softening demand and significant headwinds in our core business. But external factors are only part of the story. We have heard from many of you that the structure of our organization has become more complex, as the team management has slowed down.”

Houston also noted that the company is no longer competitive with its industry peers, and aims to become leaner and more efficient overall. The layoffs will cost the company up to $68 million in severance and related expenses, the company said in an SEC filing.

The main context surrounding the layoffs is that the company has been struggling to grow in recent quarters. Its latest earnings report, released in August, showed revenue reaching $634.5 million in the second quarter of 2024, a year-over-year increase of 1.9%, and a decline from the previous year. Dropbox has also been fending off key competitors including Box and Google, which offers Google Drive.

Markets appear to have welcomed the layoff news, however, with shares up about 2.5% since midday Wednesday. But year to date, Dropbox stock is down more than 8%.

As for what’s next? Houston did not elaborate, saying the company would make an announcement soon.

“The steps we are taking today are necessary to strengthen our core product and accelerate the growth of our new products,” he wrote. “We will share more about our 2025 strategy in the coming days.”