Shopify sees $1.5B loss turn into $68M profit, celebrates by firing 20% of staff
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Web commerce platform Shopify on Thursday announced a 25 percent increase in revenue followed by a 20 percent decrease in staff.
The job cuts come less than three months after Harley Finkelstein, president of the Ottawa-based firm, told the Canadian press, "There’s no cuts coming for us."
In its Q1 2023 results reported Shopify reported $1.5 billion in revenue, up 25 percent year-on-year, and earnings of $0.05 per share. Net income rose from a $1.47 billion loss this time last year to a modest $68 million in profit for this quarter.
Despite the positive financial results, CEO Tobi Lütke said the company would make the job cuts to staff ranks, around 11,600 employees and contractors at the end of 2022.
That number reflects a commitment in 2021 by the company to double the size of its engineering staff and also a staff decimation (10 percent) conducted in last July on account of miscalculations about the durability of pandemic ecommerce patterns.
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Shopify joins a long list of technology companies that have cut jobs in the past year or so. According to layoffs.fyi, 1,056 companies cut 164,576 jobs last year. And in 2023, 646 companies cut 187,022 jobs. Among recent layoffs, game technology maker Unity said it would dump 600 staffers, or about 8 percent of staff, on Wednesday. And last week, IBM's Red Hat said it would cut 4 percent of staff, or about 800 people.
"We are changing the shape of Shopify significantly today to pay unshared attention to our mission," said Lütke in a public memo to staff. "There are a number of consequences to this, and I don’t want to bury the lede: after today Shopify will be smaller by about 20 percent and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today."
Shopify Logistics includes Deliverr, a delivery service acquired a year ago for $2.1 billion. As part of the deal, Shopify will receive stock amounting to approximately 13 percent equity in Flexiport, on top of its existing shares.
Lütke suggests that developments in AI play some part in the company's decision to adjust its business strategy without articulating exactly what that means.
"Technological progress always arcs towards simplicity, and entrepreneurs succeed more when we simplify," he said.
"But now we are at the dawn of the AI era and the new capabilities that are unlocked by that are unprecedented. Shopify has the privilege of being amongst the companies with the best chances of using AI to help our customers. A copilot for entrepreneurship is now possible. Our main quest demands from us to build the best thing that is now possible, and that has just changed entirely."
Earlier this week, IBM CEO Arvind Krishna told Bloomberg that the company is pausing hiring for jobs that AI can do and said he expects that could affect 7,800 jobs being lost over a five year period. ®