Online payments giant Stripe is laying off roughly 14% of its staff, CEO Patrick Collison wrote in a memo to staff Thursday.
In the memo, Collison said the cuts were necessary amid rising inflation, fears of a looming recession, higher interest rates, energy shocks, tighter investment budgets and sparser startup funding. Taken together, these factors signal “that 2022 represents the beginning of a different economic climate,” he said.
Collison acknowledged that the company’s leadership made “two very consequential mistakes” by misjudging how much the internet economy would grow in 2022 and 2023, and when it grew operating costs too quickly.
Technology companies have been announcing layoffs and hiring freezes while moving to cut costs amid a worsening economic outlook. Amazon, Google parent Alphabet and Facebook owner Meta have all taken steps to rein in expenses. Companies including Netflix, Spotify, Coinbase and Shopify have announced layoffs.
San Francisco-based Stripe became the most valuable U.S. startup last year, with a valuation of $95 billion, though it reportedly lowered its internal valuation in July to $74 billion amid economic uncertainty and a prolonged tech rout, according to The Wall Street Journal. It processes billions of dollars in transactions each year from the likes of Amazon, Salesforce and Google, and it competes with Square and PayPal.
Stripe said its headcount will be reduced to about 7,000 employees, which means the layoffs impact roughly 1,100 people. A Stripe spokesperson was not immediately available to provide the exact number of impacted employees.
The cuts will affect many of Stripe’s divisions, though most will occur in recruiting, as the company plans to hire fewer people next year, Collison said in the memo.
In addition to laying off staff, Stripe intends to rein in costs across the company, Collison said.
Earlier today, Stripe CEO Patrick Collison sent the following note to Stripe employees.
Hi folks —
Today we’re announcing the hardest change we have had to make at Stripe to date. We’re reducing the size of our team by around 14% and saying goodbye to many talented Stripes in the process. If you are among those impacted, you will receive a notification email within the next 15 minutes. For those of you leaving: we’re very sorry to be taking this step and John and I are fully responsible for the decisions leading up to it.
We’ll set out more detail later in this email. But first, we want to share some broader context.
The world around us
At the outset of the pandemic in 2020, the world rotated overnight towards e-commerce. We witnessed significantly higher growth rates over the course of 2020 and 2021 compared to what we had seen previously. As an organization, we transitioned into a new operating mode and both our revenue and payment volume have since grown more than 3x.
The world is now shifting again. We are facing stubborn inflation, energy shocks, higher interest rates, reduced investment budgets, and sparser startup funding. (Tech company earnings last week provided lots of examples of changing circumstances.) On Tuesday, a former Treasury Secretary said that the US faces “as complex a set of macroeconomic challenges as at any time in 75 years”, and many parts of the developed world appear to be headed for recession. We think that 2022 represents the beginning of a different economic climate.
Our business is fundamentally well-positioned to weather harsh circumstances. We provide an important foundation to our customers and Stripe is not a discretionary service that customers turn off if budget is squeezed. However, we do need to match the pace of our investments with the realities around us. Doing right by our users and our shareholders (including you) means embracing reality as it is.
Today, that means building differently for leaner times. We have always taken pride in being a capital efficient business and we think this attribute is important to preserve. To adapt ourselves appropriately for the world we’re headed into, we need to reduce our costs.
How we’re handling departures
Around 14% of people at Stripe will be leaving the company. We, the founders, made this decision. We overhired for the world we’re in (more on that below), and it pains us to be unable to deliver the experience that we hoped that those impacted would have at Stripe.
There’s no good way to do a layoff, but we’re going to do our best to treat everyone leaving as respectfully as possible and to do whatever we can to help. Some of the core details include:
Severance pay. We will pay 14 weeks of severance for all departing employees, and more for those with longer tenure. That is, those departing will be paid until at least February 21st 2023.
Bonus. We will pay our 2022 annual bonus for all departing employees, regardless of their departure date. (It will be prorated for people hired in 2022.)
PTO. We’ll pay for all unused PTO time (including in regions where that’s not legally required).
Healthcare. We’ll pay the cash equivalent of 6 months of existing healthcare premiums or healthcare continuation.
RSU vesting. We’ll accelerate everyone who has already reached their one-year vesting cliff to the February 2023 vesting date (or longer, depending on departure date). For those who haven’t reached their vesting cliffs, we’ll waive the cliff.
Career support. We’ll cover career support, and do our best to connect departing employees with other companies. We’re also creating a new tier of extra large Stripe discounts for anyone who decides to start a new business now or in the future.
Immigration support. We know that this situation is particularly tough if you’re a visa holder. We have extensive dedicated support lined up for those of you here on visas (you’ll receive an email setting up a consultation within a few hours), and we’ll be supporting transitions to non-employment visas wherever we can.
Most importantly, while this is definitely not the separation we would have wanted or imagined when we were making hiring decisions, we want everyone that is leaving to know that we care about you as former colleagues and appreciate everything you’ve done for Stripe. In our minds, you are valued alumni. (In service of that, we’re creating alumni.stripe.com email addresses for everyone departing, and we’re going to roll this out to all former employees in the months ahead.)
We are going to set up a live, 1-1 conversation between each departing employee and a Stripe manager over the course of the next day. If you are in an impacted group, look out for a calendar invitation.
For those not affected, there’ll be some bumpiness over the next few days as we navigate a lot of change at once. We ask that you help us do right by Stripe’s users and the departing Stripes.
Our message to other employers is that there are many truly terrific colleagues departing who can and will do great things elsewhere. Talented people come to Stripe because they’re attracted to hard infrastructure problems and complex challenges. Today doesn’t change that, and they would be fantastic additions at almost any other company.
Going forward
In making these changes, you might reasonably wonder whether Stripe’s leadership made some errors of judgment. We’d go further than that. In our view, we made two very consequential mistakes, and we want to highlight them here since they’re important:
We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown.
We grew operating costs too quickly. Buoyed by the success we’re seeing in some of our new product areas, we allowed coordination costs to grow and operational inefficiencies to seep in.
We are going to correct these mistakes. So, in addition to the headcount changes described above (which will return us to our February headcount of almost 7,000 people), we are firmly reining in all other sources of cost. The world is hard to predict right now, but we expect that these changes will set us up for robust cash flow generation in the quarters ahead.
We are not applying these headcount changes evenly across the organization. For example, our Recruiting organization will be disproportionately affected since we’ll hire fewer people next year. If you want to see how your organization is impacted, Home will be up-to-date by 7am PT.
We’ll describe what this means for our company strategy soon. Nothing in it is going to radically change, but we’re going to make some important edits that make sense for the world that we’re headed into, and tighten up our prioritization substantially. Expect to hear more on this over the next week.
While the changes today are painful, we feel very good about the prospects for innovative businesses and about Stripe’s position in the internet economy. The data we see is consistent with this encouraging picture: we signed a remarkable 75% more new customers in Q3 2022 than Q3 2021, our competitive win rates are getting even better, our growth rates remain very strong, and on Tuesday we set a new record for total daily transaction volume processed. Our smaller users (many of whom are just “big customers that aren’t yet big”) are, in aggregate, growing extremely quickly, showing that plenty of technology S curves remain in the early innings and that our customers remain impressively resilient in the face of the broader global challenges.
People join Stripe because they want to grow the internet economy and boost entrepreneurship around the world. Times of economic stress make it even more important that we find innovative ways to help our users grow and adapt their businesses. Today is a sad day for everyone as we say goodbye to a number of talented colleagues. But we’re ready for a pitched effort ahead, and we’re putting Stripe on the right footing to face it.
For the rest of this week, we’ll focus on helping the people who are leaving Stripe. Next week we’ll reset, recalibrate, and move forward.
Patrick and John
This news is developing. Please check back for updates.
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
Read more CNBC tech news
Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.
An Amazon employee works to fulfill same-day orders during Cyber Monday, one of the company’s busiest days at an Amazon fulfillment center on December 2, 2024 in Orlando, Florida.
Miguel J. Rodriguez Carrillo | Getty Images
For 10 years, Aaron Cordovez has been selling kitchen appliances on Amazon. Now he’s in a bind, because most of his products are manufactured in China.
Cordovez, co-founder of Zulay Kitchen, said his company is moving “as fast as we can” to move production to India, Mexico and other markets, where tariffs are increasing under President Donald Trump, but are mild compared with the levies imposed on goods from China. That process will likely take at least a year or two to complete, he said.
“We’re making our inventory last as long as we can,” Cordovez said in an email.
Zulay is alsotemporarily raising the price of some of its milk frothers, smores roasting sticks and other products. The company’s popular kitchen strainer now costs $12.99, up from $9.99 before Trump announced his sweeping tariff proposal earlier this month.
Amazon merchants are hiking prices for everything from diaper bags and refrigerator magnets to charm necklaces and other top-selling items as they confront higher import costs. E-commerce software company SmartScout tracked 930 products on Amazon that have seen increased prices since April 9, with an average jump of 29%.
The price hikes affect a range of categories, including clothing, jewelry, household items, office supplies, electronics and toys.
The trade war with China has threatened to upend sellers on Amazon’s third-party marketplace, which accounts for about 60% of the company’s online sales. Many merchants are based in China or rely on the world’s second-largest economy to source and assemble their products.
Sellers are now faced with the conundrum of raising prices or eating the extra costs associated with Trump’s new tariffs. It’s an existential threat for many sellers, who subsist on razor-thin margins and have, for the last several years, dealt with rising costs on Amazon tied to storage, fulfillment, shipping and advertising fees along with pricing pressure from increased competition.
CEO Andy Jassy told CNBC earlier this month that the company was “going to try and do everything we can” to keep prices low for shoppers, including renegotiating terms with some of its suppliers. But he acknowledged some third-party sellers will “need to pass that cost” of tariffs on to consumers.
Amazon’s stock price is down 15% so far this year, sliding along with the broader market. The company reports first-quarter earnings next week.
Goods imported from China now face import duties of 145%, though Trump said Wednesday his administration is “actively” talking with China about a potential deal to lower tariffs. Chinese officials on Thursday denied that trade talks are taking place.
About 25% of the price increases observed by SmartScout were initiated by sellers based in China, said Scott Needham, the company’s CEO. Last week, stainless steel jewelry maker Ursteel hiked prices on four of its products by $6.50, while apparel brand Chouyatou raised the price of some of its dresses by $2. Both businesses are based in China’s Zhejiang province.
Anker, a Chinese electronics brand and one of Amazon’s largest sellers, has raised prices on one-fifth of its products sold in the U.S., including a portable power bank, which went up to $135 from $110, SmartScout data shows.
Representatives from Anker, Ursteel and Chouyatou didn’t respond to requests for comment.
Zulay, headquartered in Florida, is one of many U.S.-based sellers raising prices. The company is also cutting costs. Cordovez said he’s been forced to lay off 19% of his workforce and slash online ad spending by 85%.
Desert Cactus, based in Illinois, is also taking action. Joe Stefani, the company’s president, has been looking to move production of some of his brand’s college-themed merchandise out of China and into Mexico, India and Vietnam. About half of Desert Cactus’ goods come from China, while the rest are made in the U.S., Stefani said.
An Amazon worker moves a cart filled with packages at an Amazon delivery station in Alpharetta, Georgia, on Nov. 28, 2022.
Justin Sullivan | Getty Images
One of the company’s top products is a customizable license plate frame that’s manufactured in China. At the start of Trump’s first term in 2016, Stefani’s company paid import and shipping fees of 4% on the license plates. That rate has since skyrocketed to 170%, he said.
“The tariffs can’t stay this high,” Stefani said. “There’s so many people that just aren’t going to make it.”
Stefani said he expects Desert Cactus will end up raising prices on some products, though he’s worried shoppers might be put off by sticker shock.
“Will someone be willing to pay $50 for a hat on Amazon?” Stefani said. “You know it’s going to be expensive at the ballpark, but on Amazon we don’t know.”
Dave Dama, co-founder of health and beauty business Pure Daily Care, said the price to manufacture one of his skin-care products in China jumped to $25 from $10. Most Amazon sellers will have no choice but to raise prices, he said.
“If you were selling something for $40 and making a $7 or $8 profit at the end of the day, with these tariffs, those days are gone,” Dama said. “You can’t do that anymore. It’s unsustainable.”
Pure Daily Care plans to stagger price increases over several weeks, and only on products “we absolutely need to,” to keep Amazon’s algorithms from ranking it lower in search results or losing the valuable buy box, he said. The buy box determines which listing pops up first when a shopper clicks on a particular product, and the one that gets purchased when they tap “Add to Cart.”
An Amazon spokesperson said the company’s pricing policies continue to apply.
“As always, sellers set their own prices, and we regularly monitor how we highlight great prices as Featured Offers to provide customers with low prices across a wide selection,” the spokesperson said in a statement.
Dama said his company has enough inventory for some products to last up to six months, which it aims to “stretch as long as possible” in the hope that China and the U.S. can reach a trade deal. The company is also forgoing some sales promotions and discounts, while pausing spend on some display and video ads.
Regarding his inventory, Dama said, “We can try to stretch that seven, eight, nine months, which buys us a lot more time for this thing to work out, hopefully.”
Chinese start-up Pony.ai said Friday it will develop autonomous driving technology in partnership with Tencent Cloud and deploy robotaxi services on tech giant Tencent’s WeChat and other applications.
The Nasdaq-listed company which specializes in autonomous vehicle technology, particularly robotaxis androbotrucks, said in a press release that the deal will include cooperation in areas such as cloud services, map data, information security and intelligent cockpit ecosystems.
The arrangement will also see the two companies integrate Pony.ai’s robotaxi ride-hailing services within Tencent’s popular WeChat app as well as other applications like Tencent Maps.
Both companies had been in talks “for quite some time,” Pony.ai CEO James Peng told CNBC on the sidelines of the Shanghai Auto Show on Friday. He cited Tencent’s huge user base and its cloud offerings as factors supporting the “win-win” collaboration as the start-up continues to scale up.
Following the partnership, Peng said that “hopefully in the near future,” users would be able to call Pony.ai robotaxi rides straight through the WeChat app.
“Pony.ai possesses industry-leading autonomous driving technology accumulations, while Tencent excels in cloud services, mapping, and cockpit ecosystem technologies,” Vice President of Tencent Group and President of Tencent Smart Mobility Zhong Xiangping was quoted as saying in the Friday release.
“This strategic partnership between the two parties is not only about complementing each other’s technologies and resources but also marks a new starting point for collaborative innovation,” he added.
The release said that the partnership would also see both companies collaborate on the development, testing, and operation of Robotaxis, particularly in L4-level autonomous driving.
According to SAE International, L4 is a type of autonomous driving that allows drivers to take their eyes off the road in designated areas. For comparison, L3 is considered a hands-off system, but drivers must actively monitor the vehicle and be ready to take over the wheel.
The Tencent Cloud agreement comes a day after it was reported that Pony.ai unveiled its L4, seventh-generation robotaxi solution at the Shanghai Auto Show on Wednesday. The company’s shares surged about 40% in the U.S. on Thursday.
The start-up continues to establish itself as a prominent player in China’s autonomous driving industry. The company obtained China’s first permit to charge fares for fully driverless taxis in core parts of a business district of Shenzhen, where Tencent is headquartered.
However, the firm may be implicated in increasing trade tensions between China and the U.S. as the latter is a market Pony.ai considers “hugely important” to its expansion plans.
James Peng, co-founder and chief executive of Pony.ai this week reportedly told the Financial Times that the company is considering a secondary listing outside the U.S. amid mounting concerns that Washington will push for the delisting of Chinese companies off the New York Stock Exchange.
If this were to happen, it would come less than six months after the company’s initial public offering in the U.S. Notwithstanding, Peng told FT that a lot of factors need to be considered.