DoorDash (NYSE: DASH) revealed it will be laying off 1,250 corporate workers as it strives to cut costs. The rising operating costs stemmed from tapering growth and overhiring, according to a message sent to employees from CEO Tony Xu. The company’s shares shot up 5% Wednesday amid the news.
“We were not as rigorous as we should have been in managing our team growth,” Mr. Xu said in the memo. “That’s on me. As a result, operating expenses grew quickly.”
DoorDash is one of many technology companies to cut staff as rising interest rates and economic instability direct investor focus toward profitability. The company is also working to shift consumer habits as trends level out from pandemic interference. Following rapid growth throughout the pandemic, food delivery companies have experienced slowing growth amid inflation and the possible economic downturn.
The online food ordering and delivery platform had more than 8,600 employees at the beginning of the year, but that number shot up to about 20,000 after it closed its deal to acquire European food-delivery company Wolt Enterprises Oy at the start of 2022, a spokesman revealed.
“We have and will continue to reduce our non-headcount operating expenses, but that alone wouldn’t close the gap,” Mr. Xu said. He also said the business remains strong and more resilient than other e-commerce companies, despite the layoffs.
“We’re confident that we have reset the size and shape of our organization to match our strategic priorities. We must keep this level of discipline moving forward,” he said. DoorDash will continue to hire in a more targeted way, Mr. Xu said.