Food Delivery Company Is The Latest Silicon Valley Firm To Announce Mass Layoffs
Doordash Inc. signage is displayed on an Apple Inc. iPhone in an arranged photograph taken in the Brooklyn borough of New York, U.S., on Friday, Jan. 10, 2020.
Gabby Jones/Bloomberg via Getty Images

DoorDash announced on Wednesday that the food delivery company will become the latest technology firm to dismiss a substantial number of employees in an effort to limit expenses.

In a letter to staff members, DoorDash CEO Tony Xu remarked that the company would decrease corporate headcount in order to reduce high operational costs amid economic headwinds. The company had increased hiring over the past three years as lockdowns presented “sudden and unprecedented opportunities” for food delivery services.

“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,” Xu wrote. “That’s on me. As a result, operating expenses grew quickly.”

The move to reduce headcount occurs weeks after DoorDash announced better-than-expected financial results for the third quarter of 2022. The company lost $0.77 per share even as total orders increased to 439 million, marking 27% growth from the third quarter of 2021. The company’s stock has nevertheless fallen over 61% since the beginning of the year, even as the Dow Jones Industrial Index declined nearly 8% and the technology-heavy NASDAQ plummeted more than 30%.

DoorDash dismissed approximately 1,250 individuals, who will receive 17 weeks of compensation, continued healthcare coverage, and immigration support. The departing employees will also receive career transition services.

“Our business fundamentals remain strong,” Xu continued in the letter to employees. “But as I’ve said before, what got us here won’t necessarily bring us to the next stage and we have to tailor some of our tactics. Looking ahead, we’re confident that we have reset the size and shape of our organization to match our strategic priorities.”

The startup is one of several technology companies to announce widespread dismissals in recent months. Companies such as Amazon, Microsoft, and Tesla have announced hiring pauses or layoffs for their corporate offices, citing broader economic uncertainty and the probability of a prolonged contraction. Elon Musk, who has dismissed approximately two-thirds of employees at social media platform Twitter, said that the Federal Reserve is “massively amplifying the probability of a severe recession” through the rollback of expansionary monetary policy and “needs to cut interest rates immediately.”

Although other sectors have also reduced headcount in an effort to limit expenditures, Silicon Valley has been a particular target of criticism from investors who believe companies should prepare for a coming economic storm. Altimeter Capital Management CEO Brad Gerstner said in a recent letter to Meta CEO Mark Zuckerberg that the social media company, which has more than tripled headcount over the past four years, should dismiss workers to reduce costs.

“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” the investor wrote. “I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion.”

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