Using AI as a cover story for workforce reductions appears to be rapidly becoming outdated.
Unlike many of his peers in the tech industry, which have cut thousands of jobs this year due to the need to restructure teams to take full advantage of AI, Robinhood CEO Vlad Tenev conspicuously did not mention AI at all in his memo to employees announcing that the company would lay off 10% of its full-time workforce, or about 290 people.
The company’s regulatory filings also did not announce the move, instead characterizing the layoffs as a restructuring measure.
Still, Tenev said the company will “use frontier technologies to further our execution,” which sounds like a conscious effort to avoid even the name AI. That’s not surprising. Sentiment toward AI and related infrastructure projects is on the decline, even as a handful of tech executives are making stupid banks.
But Tenev added to the ongoing discourse that companies need to operate with smaller teams and “flatter organizational structures,” writing, “We cannot default to operating as layered organizations. We must be lean, hyper-focused teams where each person is empowered to make a big impact.”
We’ve seen a variety of companies use similar language in their layoff announcements, including Amazon, Block, Coinbase, GitLab, and Intuit. This shows that large teams, bureaucracy, and siled departments are seen as undesirable items at a time when AI tools promise massive productivity gains.
Some even think this is an implicit allusion to the fact that tech companies overhired after the coronavirus pandemic but are now scaling back, especially as expenses related to heavy use of AI begin to mount.
Either way, these companies are doing very well. Tech stocks are broadly surging on record revenues, improving profit margins (GitLab reported 88% gross margin last month), surging demand for cloud services, and the belief that the billions of dollars poured into data center projects will yield orders of magnitude higher returns.
Robinhood itself reported a 15% improvement in first-quarter revenue in April, and the company said its second-quarter performance was better due to higher predictive market fees, subscription revenue, and higher stock and options trading volumes as markets stabilized.
The company said Tuesday it is also closing a “small number” of open positions and will incur approximately $28 million in costs related to the layoffs.
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