Dropbox lays off 20% of its total workforce, cutting more than 500 jobs

Dropbox has announced a 20% reduction in its workforce, impacting 528 employees, as part of its efforts to fuel revenue growth and reduce expenses. CEO Drew Houston described the move as necessary for navigating a “transitional period,” aiming to streamline costs while advancing the company’s AI-driven initiatives.

This announcement follows an earlier layoff of 16% of Dropbox’s workforce in April 2023 when the company redirected resources toward artificial intelligence. In a letter to employees, Houston explained that these cuts focus on areas of “over-investment” and aim to create a “flatter, more efficient” team structure.

“I’m writing to let you all know that after careful consideration, we’ve decided to reduce our global workforce by approximately 20% or 528 Dropboxers. As CEO, I take full responsibility for this decision and the circumstances that led to it, and I’m truly sorry to those impacted by this change,” Houston wrote. “This market is moving fast and investors are pouring hundreds of millions of dollars into this space. This both validates the opportunity we’ve been pursuing and underscores the need for even more urgency, even more aggressive investment, and decisive action.”

Houston outlined three main reasons for this latest reduction. The first is the slower growth in Dropbox’s core file sync and share (FSS) business. In the last quarter, Dropbox’s revenue increased by just 1.9% year-over-year, reaching $634.5 million. Paid subscriptions grew modestly, adding 16,000 new users for a total of 18.22 million.

The second reason, according to Houston, is the company’s evolving growth strategy. “Our FSS business has matured, and we’re working to drive the next phase of growth with products like Dash,” Houston noted in a blog post. “But managing this transition with our existing structure and investment levels isn’t sustainable.”

Dash, an AI tool launched last year, allows users to search files across Dropbox and third-party cloud platforms like Salesforce. The tool’s latest version, introduced this month, includes AI-generated file summaries and enhanced cybersecurity controls.

Dropbox has also recently introduced new features to strengthen its core platform, including end-to-end encryption for file sharing and an option for customers to scramble data with their own encryption keys.

Another driver for the restructuring is the need to simplify Dropbox’s operational structure. Houston acknowledged that many employees feel the organization has become overly complex, with excess management layers slowing down decision-making.

According to an SEC filing, Dropbox expects total cash expenses related to the layoffs to range between $63 million and $68 million, mainly for severance and benefits. The company will recognize an additional $47 million to $52 million in expenses, most of which will occur in Q4 2024, with remaining payouts in H1 2025. Affected employees will receive severance, equity, transition payments, healthcare benefits, and job placement assistance.

In recent quarters, Dropbox has faced growing competition from Box, Google Drive, and other cloud storage providers, leading to slowed revenue growth and limited user gains. In Q2, Dropbox reported only 1.9% growth year-over-year—the lowest in its history—while its shares have declined over 20% since the start of the year.

Founded in 2007 by Arash Ferdowsi and Drew Houston, Dropbox is a cloud-based platform that simplifies file storage, sharing, and collaboration for individuals and businesses alike. The company later expanded beyond basic file storage to include advanced collaboration tools and AI-driven features.

With over 500 million registered users and 150,000 businesses worldwide, Dropbox has become integral to everyday workflows, enabling teams to collaborate on projects, share large files, and work more flexibly across locations and devices.