What’s happening with the DoorDash layoffs?

DoorDash is laying off 1,250 people in corporate roles, which equates to 6% of its workforce. DoorDash had 8,600 corporate employees as of the end of 2021. The company will offer 17 weeks of severance, and health care will continue until March of next year.

These recent layoffs mean that DoorDash is joining other major companies like Amazon, Twitter, Meta, and Lyft in cutting staff in 2022. These companies experienced booms during the pandemic when everyone was at home and they couldn’t keep up with staffing requirements.

Now they have to scale back as consumers become conscious about spending with soaring inflation. Many of these companies have seen their market caps shrink dramatically and their investor confidence decrease.

In an official statement on November 30, DoorDash CEO Tony Xu discussed how the company experienced unprecedented opportunities during the pandemic. Hence, they had to accelerate the hiring process to keep up with the growth. The company ultimately failed to properly manage the team's growth as it took on too much staff to match the current climate. Xu also commented on the company’s expenses:

“While our business continues to grow fast, given how quickly we hired, our operating expenses – if left unabated – would continue to outgrow our revenue.”

This was a key point from the memo as the company has struggled to turn a profit despite having a highly successful IPO at the end of 2020 during the pandemic boom.

The layoffs came at a slightly surprising time since we’re about to experience the holiday rush that often increases revenue due to more people ordering food for holiday-related events.

How is DoorDash performing financially?

DoorDash released its earnings report for the third quarter of 2022 on November 3 for investors. Here are some of the highlights from this report:

• DoorDash lost $295 million, which is much more than the $101 million loss from the same period a year ago.
• Revenue was $1.7 billion, up 33% year over year and higher than the $1.63 billion analyst estimate.
• In the first nine months of 2022, DoorDash generated over $70 billion in sales for merchants and over $25 billion in earnings for dashers (food delivery drivers).
• Total orders were at 439 million, which is up 27% year over year.

DoorDash shares went up about 14% in the after-hours trading when the company announced financial results that included higher sales and total orders than analysts had initially predicted. The total number of orders shot up 27% to 439 million, but that wasn’t enough to help the company make a profit.

Considering the current macroeconomic environment, the 33% bump in revenue is impressive, but the company has to find ways to cut its expenses in order to be in the black.

Read the full report here