Dropbox Cuts 500 Staff; CEO Cites Slow Growth, Arrival Of ‘AI Era’

File hosting service Dropbox is reducing its workforce by about 16% or 500 employees. Its CEO Drew Houston hinted the arrival of the “AI era” has affected the decision to eliminate roles.

In a message to employees, Houston said while Dropbox’s business was profitable, “our growth has been slowing.” The growth slowdown was due to the “natural maturation” of the business, he explained.

The CEO noted the economic downturn has put pressure on consumers, thus affecting the business.

Another reason for the workforce reductions was the arrival of “the AI era of computing,” Houston said, adding he believes AI would give the company “new superpowers.”

“The opportunity in front of us is greater than ever, but so is our need to act with urgency to seize it,” he pointed out. While the company has previously moved people from one team to another, the “next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development.”

The cloud storage giant introduced some AI-powered features in recent years such as automatic text recognition.

Dropbox estimated that it would incur charges of $37 million to $42 million due to its workforce reduction that will cover severance pay, employee benefits and other related costs, according to a filing with the Securities and Exchange Commission (SEC).

The previous round of staff cuts took place in early 2021 when the company announced it was laying off 315 people, or about 11% of the global workforce, as it was trying to “create a healthy and thriving business for the future.”

Houston said Dropbox had to focus largely on projects that “align tightly with our strategic priorities,” which meant some teams needed to be cut down. “This is one of the toughest decisions I’ve had to make in my 14 years as CEO,” he wrote to employees at the time.

On Wednesday, Facebook parent company Meta announced that AI has played a key role in increasing traffic to the social media giant’s platforms. Houston is reportedly a member on Meta Platforms’ board of directors.

Houston’s remarks regarding AI come as some experts and analysts warn about artificial intelligence potentially leading to the loss of jobs in an already disrupted jobs market.

Last month, Goldman Sachs economists warned that up to 300 million full-time jobs would be affected globally as interest in automation through AI tech builds up. They predicted about 18% of the world’s jobs may be computerized, and the effect would be felt largely in advanced economies and emerging markets, CNN reported.

While the economists predicted the adoption of AI tech like Microsoft-backed ChatGPT may lead to job losses, they also said innovative tech that displaces human jobs initially has created new job opportunities in the long run.

Some experts have also raised concerns about the potential further widening of income and wealth inequality in the U.S.

In February, Lawrence Katz, a labor economist at Harvard, told The Guardian that he believes AI and robotics will continue to transform the mix of jobs.

“The question is: will the change in the mix of jobs exacerbate existing inequalities?” he argued.

Katz also raised the issue of whether AI’s potential in increasing productivity can displace many jobs and also create new positions that will raise living standards.

Experts say AI and other innovations may actually hurt middle-level, white-collar jobs more than lower-paying and physical jobs.