Dropbox is laying off 20% of its workforce as the cloud company enters what CEO Drew Houston calls a “transition phase.”

In a letter to staff, Houston said the workforce reductions would affect 528 people. The goal is to make cuts in areas where Dropbox has “overinvested” while creating a “flatter, more efficient” team structure.

“As CEO, I take full responsibility for this decision and the circumstances that led to it, and I am sincerely sorry to those affected by this change,” he wrote. “This market is developing rapidly and investors are investing hundreds of millions of dollars in this area. This confirms both the opportunity we have been pursuing and the need for even greater urgency, aggressive investment and decisive action.”

According to a filing with the SEC, Dropbox estimates it will take a total cash charge of $63 million to $68 million for the layoffs, primarily in the form of severance and benefits, and record $47 million to $52 million in additional costs. The majority of payouts will occur in the fourth quarter of 2024, with the remainder recorded in the first half of 2025.

Affected employees will receive severance, equity and transition payments, as well as certain health benefits and employment services.

Dropbox has struggled to grow in recent months, losing market share to competitors like Box and Google Drive. In its most recent fiscal quarter, the company added just 63,000 new users – a fraction of its roughly 18 million user base – while revenue growth fell to low single digits.

In the second quarter, Dropbox posted its lowest growth in its history: a 1.9% year-over-year increase to $634.5 million. As of August, the company's shares had lost more than 20% of their value year to date.

“We continue to see weakening demand and macroeconomic headwinds in our core business,” Houston wrote. “While I am proud of the progress we have made in recent years, in some areas of the business we are still not delivering at the levels our customers deserve or achieving the same level of performance as our industry competitors.”

The layoffs come a year after Dropbox laid off around 500 employees – and as the company increasingly invests in AI technologies. Dropbox recently expanded its AI-powered intelligent organization and search tool Dropbox Dash with business-focused features, including data management controls.

In his letter, Houston said Dropbox plans to share more details about key changes and its 2025 strategy in the coming days.