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Salesforce Is Cutting 10% of Its Personnel, More Than 7,000 Employees

David Paul Morris | Bloomberg | Getty Images
  • Salesforce is cutting 10% of its personnel and reducing some office space as part of a restructuring plan.
  • Co-CEO Marc Benioff told employees that customers have been more "measured" in their buying decisions in the challenging macroeconomic environment.
  • The cloud-based software company let go hundreds of employees in November.

Salesforce is cutting 10% of its personnel and reducing some office space as part of a restructuring plan, the company announced Wednesday. The company employed more than 79,000 workers as of December.

In a letter to employees, co-CEO Marc Benioff said customers have been more "measured" in their purchasing decisions given the challenging macroeconomic environment, which led Salesforce to make the "very difficult decision" to lay off workers.

"I've been thinking a lot about how we came to this moment," he said. "As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that."

Salesforce will record charges of $1.0 billion to $1.4 billion related to the headcount reductions, and $450 million to $650 million related to the office space reductions, the company said.

Shares of Salesforce closed up more than 3% on Wednesday.

Analysts led by Brent Bracelin at Piper Sandler, who have the equivalent of a buy rating on Salesforce stock, estimated in a note to clients that the cuts could lower operating expenses by $1.5 billion or more each year and widen the company's operating margin to 26% from 21%. That calculation assumes that "demand drivers remain intact," which is unlikely, the analysts wrote.

The company is eager to become more profitable through more efficient spending. In September Salesforce management called for a 25% adjusted operating margin in the 2026 fiscal year, compared with 22.7% in the quarter that ended on Oct. 31.

The cuts mark the latest round of departures at the cloud-based software company, the largest private employer in San Francisco. The company let go of fewer than 1,000 employees in November. Later that month, Bret Taylor announced his plan to step down as co-CEO on Jan. 31, leaving Marc Benioff alone again at the top of the company he co-founded in 1999.

In the three trading days after the Taylor news landed alongside Salesforce's third-quarter earnings report, the stock had two of its three worst days of 2022, plunging 8.3% and 7.4%, respectively. 

Days later, the company announced the departure of Slack CEO Stewart Butterfield, who joined Salesforce as part of its biggest acquisition ever.

Salesforce hired aggressively during the pandemic. It said in a December filing that headcount had risen 32% since October 2021 "to meet the higher demand for services from our customers."

Now, like many other major tech companies, Salesforce is looking to cut costs as it contends with slowing revenue growth and a weakening economy. Days after Twitter's new boss, Elon Musk, slashed half his company's workforce, Facebook parent Meta announced its most significant round of layoffs ever, eliminating 13% of its staff. AmazonLyftHP and DoorDash also announced significant cuts to their workforces.

Salesforce said it expects its employee restructuring to be complete by the end of the 2024 fiscal year and real estate restructuring to finish in the 2026 fiscal year.

— CNBC's Jordan Novet contributed to this report.

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