Splunk (NASDAQ:SPLK) is the latest technology company to join the layoffs trend. The software producer has enjoyed an excellent start to the year, with shares up more than 11% so far in 2023. Today, however, the company announced that it will be laying off roughly 325 staff members, or about 4% of its workforce.
News of the Splunk layoffs hasn’t pushed shares down so far. In fact, SPLK stock is currently in the green, although it has been fairly volatile. That said, this development does raise some questions about the future of the company and how it plans to proceed as markets enter a new year.
Let’s dig deeper into what SPLK stock investors need to know about the news.
The Splunk Layoffs: A Closer Look
Tech companies implementing job cuts has been one of this year’s most dominant trends so far. While layoffs have by no means been confined to tech, it’s difficult to ignore the many prominent Silicon Valley icons reducing their workforces lately. The Splunk layoffs follow similar announcements from HubSpot (NYSE:HUBS) and Upstart (NASDAQ:UPST) — and that’s just what’s in today’s news cycle.
As of this writing, SPLK stock is up a little more than 1% and looks poised to keep climbing. That’s likely because the Splunk layoffs are seen as a cost-cutting move on behalf of management. In a letter, CEO Gary Steele stated the following:
“This decision is another step in a broader set of proactive organizational and strategic changes that include optimizing our processes, cost structure and how we operate globally to ensure Splunk continues to balance growth with profitability through these uncertain times and drive success over the long term.”
That fits the typical narrative surrounding layoffs. But investors should also note that the job cuts announcement comes at a time when demand for Splunk’s services is rising. The company has carved out a niche for itself, including as a player in the fast-growing artificial intelligence (AI) market. The list of customers relying on Splunk’s solutions is long and has been growing steadily.
Clearly, Splunk thinks it can meet growing demand with a smaller workforce. Moving forward, investors should keep a close eye on SPLK stock as the Spunk layoffs take effect. It could be a winner of the current AI boom — although, when their fields are expanding, most companies scale up and not down.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.