Coinbase Cuts 14% Workforce as Armstrong Pushes AI Shift, COIN Stock Drops

Key Insights:

• Coinbase (COIN) sacked nearly 14% of its workforce as it moves to increase the usage of AI.
• The company announced a severance package of 16 weeks and vowed to aid affected individuals in this transition.
• The COIN stock plunged after the news, dropping below the $200 level.

Coinbase exchange has declared major layoffs as it dismissed some 14% of its staff. CEO Brian Armstrong noted that the move is part of an initiative to transform itself into an AI-driven enterprise.

After the announcement, the COIN stock plunged significantly, suggesting the development’s impact on the investors’ sentiment.

Coinbase CEO Announces Massive Layoffs

Armstrong, in a detailed message to the employees, has referred to the layoffs as a necessary step. To justify the “difficult decision,” he spotlighted the current market conditions as well as the rapid technological change.

Although he noted that Coinbase (COIN) is still financially healthy and diversified, the crypto market continues to be highly volatile.

“We’re currently in a down market and need to adjust our cost structure now so that we emerge from this period leaner, faster, and more efficient,” he said.

Brian Armstrong Announces Coinbase (COIN) Layoffs | Source: Brian Armstrong, X

In addition to market pressures, Armstrong indicated that artificial intelligence is completely changing the way Coinbase exchange conducts operations. He mentioned that teams are utilizing AI to deliver results faster.

Moreover, he mentioned that engineers are now capable of producing results in days, compared to weeks before. Armstrong believes that this change has provided an “inflection point” not only to the crypto exchange but also to the entire corporate world.

Coinbase, as a part of the restructuring, is redesigning its internal operations. The company will minimize management layers and organizational depth and focus on a model whereby leaders are hands-on contributors.

Brian Armstrong indicated that the company will limit its structure to five levels below the top leadership. In addition, it will encourage its managers to be “player-coaches” and not managers who are purely supervisory.

One of the key aspects of the new strategy is the introduction of so-called AI-native pods. These are smaller, highly agile teams capable of handling AI systems and providing results with a minimum number of people.

In other cases, Coinbase will experiment with ultra-lean setups. These include teams that feature a single person performing multiple roles, such as product, engineering, and design.

Coinbase Announces Severance Packages For Employees

In conjunction with the layoffs, Coinbase (COIN) has defined a detailed severance program for affected employees. The U.S. personnel will be given a minimum of 16 weeks of base salary with an additional two weeks’ pay for every year of service.

The company will additionally offer the subsequent equity vesting cycle as well as six months of COBRA health insurance. The employees who are not in the U.S will receive similar support according to the local laws.

Meanwhile, the employees on work visas will be offered additional assistance in the transition process.

Armstrong admitted the human impact of the decision, as he praised the efforts of departing employees and the suddenness of the process. However, he clarified that the option of accessing the company systems was eliminated on the spot. It aims to prevent user data leakage.

Q1 Earnings Estimates & COIN Stock Price Today

The timing of the layoffs is interesting as it comes right before the Q1 earnings report on May 7. Analysts are projecting a sharp drop in performance.

Wall Street analysts expect Coinbase’s earnings per share to fall as low as $0.36, a decline of 81.4% year-over-year. They pegged the revenue estimates at $1.5 billion, as compared to the previous quarter’s revenue of $1.78 billion.

COIN Stock Chart | Source: Yahoo! Finance

Further, amid weak earnings estimates and layoffs, the COIN stock dropped. At the time of writing, the Coinbase shares price dipped 2.85% to 197.20 on Tuesday, May 5.

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