Add DoorDash to the growing list of tech companies conducting layoffs amid a harsh economic climate.
In a note to employees, DoorDash CEO Tony Xu said the food delivery company was cutting some 1,250 jobs—around 6% of its workforce—citing growing costs and declining growth due in part to inflation. DoorDash stock rose around 5% on the news.
Xu wrote that although “the business remains strong and continues to grow,” the rapid hiring the company undertook during the pandemic needed to be scaled back.
“Most of our investments are paying off, and while we’ve always been disciplined in how we have managed our business and operational metrics, we were not as rigorous as we should have been in managing our team growth. That’s on me,” he wrote.
The job cuts include 311 employees in DoorDash’s San Francisco offices, according to a state filing. Seventy-five DoorDash employees based in Los Angeles will also be let go.
Xu’s statement echoed that of leaders at Meta, Stripe, Patreon and others when justifying their own job cuts. The companies blamed overexuberance and overoptimism about pandemic-led growth for digital businesses.
Now, with higher interest rates hammering technology stocks and raising borrowing costs, many companies are taking a look at their internal metrics and coming to the same conclusions.
Xu said the company’s growth is waning compared to the heady days of the pandemic, and that without the job cuts, its expenses would continue to outgrow revenue. Impacted workers will receive 17 weeks of severance pay in addition to their February 2023 stock vest.
The announcement comes a few months after DoorDash closed its purchase of Finnish delivery platform Wolt, which it acquired in an all-stock deal worth about $8.1 billion.
Xu wrote that “we’re confident that we have reset the size and shape of our organization to match our strategic priorities” and hiring and recruitment going forward will be conducted “in a more rigorous way.”
In the company’s third-quarter earnings call earlier this month, DoorDash reported revenues of $1.7 billion, beating analyst expectations. But net losses more than doubled year over year to $295 million, or 77 cents per share.