Lyft Announces Layoffs as Tech Sectors’ Woes Look Far from Over

Lyft is looking at “significant layoffs” which would reportedly impact around a third of its workforce as US tech companies continue to grapple with slowing growing and soaring expenses.

While Lyft hasn’t disclosed the quantum of layoffs which are set to be officially communicated to employees next week, the Wall Street Journal reported that they would be around 1,200 – or 30% of its current workforce.

In a staff note, Lyft’s CEO David Risher said, “We need to bring our costs down to deliver affordable rides, compelling earnings for drivers, and profitable growth.”

Risher, a former Amazon executive added, “We intend to use these savings to invest in competitive pricing, faster pick-up times, and better driver earnings. All of these require us to reduce our size and restructure how we’re organized.”

The layoffs come shortly after Risher took over as Lyft’s CEO from the company’s co-founder Logan Green – who along with John Zimmer stepped back from the day-to-day operations of the ride-hailing company.

The decision of two co-founders to step back came weeks after the company reported dismal earnings for the fourth quarter of 2022.

It forecast revenues of $975 million for the first quarter which was way below the $1.1 billion that analysts expected.

The company’s earnings were in stark contrast to rival Uber – which not only posted better than expected earnings but also provided upbeat guidance – forecasting Q1 revenues to rise between 20%-24%.

Lyft Considers Mass Layoffs Amid Slowing Growth

Notably, this would be the second round of layoffs from Lyft and in November it had laid off 13% of its workforce.

Last year, Lyft’s revenues increased 28% YoY to $4.1 billion but the growth rate tapered down from 35.7% in the previous year.

It reported 20.3 million active riders in the fourth quarter which was similar to the previous quarter but 8.7% higher than the corresponding quarter in 2021. The company’s active riders haven’t yet risen to pre-pandemic levels and it had 22.9 million active riders in Q4 2019.

Lyft posted a net loss of $1.6 billion in the year which included $767.8 million of stock-based compensation and related payroll tax expenses.

While Uber is now moving towards sustainable profitability, Lyft is still struggling with massive losses.

• Read our guide on buying Uber stock

That said, even Uber laid off some employees last year in order to realign the workforce with new macroeconomic realities.

Tech Layoffs Look Far from Over

Far from cribbing about the shortage of tech workers, tech companies have been on a workforce reduction spree and most tech companies including Lyft have laid off employees.

According to the data compiled by Layoffs.fyi, over 170,000 tech employees have been laid off this year – which might seem at odds with the wider job market which added over 1 million new jobs in the first quarter of the year.

While the topline growth of tech companies has come down and, in some cases, turned negative, they find themselves overstaffed and are looking to become more “efficient.”

Meta Platforms’ CEO Mark Zuckerburg said that 2023 is the “year of efficiency” for the company. It looks pretty much the template for the entire tech sector which is now tightening belts after two years of relentless hiring and spending spree

Markets have supported Meta’s cost-cut efforts and with YTD gains of over 75%, it is the second-best S&P 500 stock this year.

• Read our guide on buying Meta stock

Coming back to Lyft, the stock has underperformed Uber by a wide margin last year and has lost over two-thirds of its market cap.

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