Shopify says it is cutting about 1,000 employees, or about 10% of its global staff

As a result of the news, Shopify's shares fell more than 16%.

The company's failure to meet analyst expectations following the release of first-quarter earnings report and the announcement that it would pay $2.1 billion in cash and stock to purchase logistics start-up Deliverr also contributed to the decline.

According to a Refinitiv survey, Shopify's adjusted earnings came in at 20 cents per share while Wall Street had anticipated 63 cents per share. Although revenue increased by 22% year over year to $1.2 billion, it was still less than Wall Street's forecast of $1.24 billion.

Along with predicting slower sales growth in the first half of the year, Shopify also anticipated dealing with challenging comparisons to the epidemic era.

CEO Tobi Lutke stated in a note to colleagues that he had underestimated the duration of the pandemic economy recovery and that Shopify will be cutting some positions in light of a general decline in online shopping.

As of December 31, 2021, Shopify had over 10,000 employees, according to a securities filing.

The online retailer said it is going to eliminate "over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products," according to Lutke's memo. The layoffs will cover all Shopify's divisions, though the majority will happen in recruiting, support, and sales.

“It’s now clear that bet didn’t pay off,” Lutke said. “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Amid the global economic instability and a slowing of the pandemic trends, tech firms have been reporting layoffs, recruitment halting, and the cancellation of job offers. Most recently, Google parent Alphabet Inc. and Facebook parent Meta both announced that they would cut down on hiring. Other tech giants including including Netflix and Coinbase also announced layoffs recently.

Shopify and other online retailers started to face concerns that they'd never be able to maintain the rapid expansion they had experienced once conventional stores reopened and customers resumed their pre-pandemic shopping.

“While we’ve experienced massive macro shifts since the start of the pandemic, the one mainstay has been that Shopify is the commerce platform of choice for merchants in any environment, with the ability to support commerce on any surface,” Shopify president Harley Finkelstein said in a statement.

According to Lutke, Shopify wagered that the proportion of online shopping over in-store purchases will "permanently leap ahead by 5 or even 10 years." The company claimed in February that it has increased its workforce by more than tripling since the end of 2019 in order to prepare for what it thought would be a prolonged transition to e-commerce.

Shopify predicted in its most recent earnings report that revenue growth would be slower during first half of the year. 

According to Shopify, employees who are laid off will get 16 weeks of severance compensation in addition to one week for each year of employment.