WSJ News Exclusive | Lyft to Pause Some Hiring and Trim Budgets, Citing Economic Slowdown

“It’s clear from our discussions with other business leaders that every company is taking a hard look at how they respond to concerns about an economic slowdown and the dramatic change in investor sentiment,” Mr. Zimmer wrote in an internal memo viewed by The Wall Street Journal.

“Given the slower than expected recovery and need to accelerate leverage in the business, we’ve made the difficult but important decision to significantly slow hiring in the US,” he said.

That includes the company giving priority to fewer initiatives, not filling many of the current open roles and focusing hiring on roles deemed critical, such as those that support its core rides business, Mr. Zimmer said. He said there are no layoffs planned.

Lyft’s board met on Friday to discuss the cuts, said a person familiar with the meeting. Lyft began signaling to some employees recently that there would be a hiring slowdown and cutting of budgets, another person familiar said.

Lyft shares have lost more than 60% since the start of the year, more than double the decline of the Nasdaq Composite Index. After declining more than 15% Tuesday, Lyft shares were up less than 1.5% in after-hours trading after the Journal reported about the plans.

Tech companies that powered the U.S. economy during the pandemic are suffering through a punishing stretch. Concerns about rising interest rates and the reversal of some pandemic trends that bolstered tech revenues have hit the share prices of

Peloton Interactive Inc.,

PTON -8.08%

Netflix Inc.,

Amazon.com Inc.

AMZN -3.21%

and others.

Last month Amazon reported the slowest quarterly revenue growth in about two decades. Netflix lost subscribers during its first quarter for the first time in more than a decade and signaled that losses are set to continue.

Apple Inc.

AAPL -1.92%

cautioned that the resurgence of Covid-19 in China could hinder sales.

The shares of

Snap Inc.

SNAP -43.08%

tumbled 43% Tuesday after it said in a Monday filing that revenue and adjusted pretax earnings for the second quarter will come in below the range the company projected barely a month ago due to weak advertising revenues. Other tech stocks that rely on digital advertising, including Google parent

Alphabet Inc.

GOOG -5.14%

and

Facebook

parent

Meta Platforms Inc.,

FB -7.62%

also fell.

After years of adding jobs at a rapid pace, some tech companies have been broadcasting that they think it is time to take a more cautious approach. The pullback by tech giants raises questions about the direction of the overall U.S. job market and economy.

Meta, Peloton and Uber are among the tech companies that have announced they will slow hiring or re-evaluate their head count in recent weeks.

Among the other issues cooling the long-hot sector: inflation, labor shortages and supply-chain issues.

Uber and Lyft are struggling with a year-long driver shortage that has pushed fares to record highs. The elevated fares have partly resulted in fewer Lyft riders and fewer Uber trips compared with before the health crisis, though both companies’ first-quarter revenue outpaced prepandemic levels on the back of higher prices.

Lyft’s first-quarter results were overshadowed by a weaker-than-expected earnings outlook as the company said it would need to spend more money to incentivize drivers to return. Its stock tumbled more than 35% after the announcement, marking the biggest percentage drop in a single day since the company went public in 2019.

Earlier this month, Uber said it would cut spending on marketing and scale back on hiring as it focuses on turning a profit.

Both companies spent big for years to gain customers and market share. But their 2019 public offerings disappointed, with Wall Street increasingly wanting to see money-losing companies turn a profit.

“As we’ve seen and discussed, public market investors have continued to sharply shift their focus onto a potential recession and a company’s ability to deliver near-term profits,” Mr. Zimmer wrote in Tuesday’s memo.

He went on to write that “our near-term action plan will be focused on accelerating profits—whether we like it or not, that’s the ticket of entry in today’s market.”

Uber and Lyft have trimmed their losses, unloading costly divisions such as their self-driving units and cutting staff during the health crisis. Both companies turned a quarterly adjusted profit before certain expenses like interest, taxes and depreciation last year.

Uber said it expects to be cash-flow positive on a full-year basis this year. If it meets that goal, it would mark the first time the underlying operations of the ride-share and food-delivery giant generate more money than it spends.

Write to Preetika Rana at [email protected] and Emily Glazer at [email protected]