WeWork Inc (WE.N) on Thursday predicted lower-than-expected revenue for the current quarter, flagging that its business of providing flexible workspace was facing pressure from mass layoffs in the technology sector.
Shares of WeWork slipped 5.5% in morning trade, after the company predicted current-quarter revenue of $830 million to $855 million, lower than analysts’ estimates of $918.4 million.
Headcount reductions undertaken by several companies across the United States have affected certain locations, WeWork Chief Executive Officer Sandeep Mathrani said on a post-earnings call.
Big Tech companies and Wall Street giants are leading a string of layoffs across corporate America as companies look to curb costs to weather a global economic downturn.
“Corporate headcount reductions, particularly in tech are going to hurt WeWork, as companies dial down their requirements for flexible office space capacity,” Third Bridge analyst Omar Fahmy said.
“This pressure is amplified by the fact that WeWork’s co-working facilities were built for smaller companies. SMEs will be among the hardest hit during an economic downturn.”
The New York-based firm, which provides workstations, private offices and customized floors, had benefited from a pandemic-driven shift to flexible work outside traditional offices, but is now getting ready for a fallout from a potential downturn in the economy.
The office-sharing company, which launched its IPO in 2021, said for the “first time in WeWork’s history”, the company achieved an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) profitability for December last year.
Buy Bitcoin NowFor the fourth quarter ended Dec. 31, the New York-based firm reported revenue of $848 million, below predictions of $873.8 million, according to the mean estimate from five analysts, based on Refinitiv data.
Its adjusted EBITDA for the December quarter was negative $26 million, in comparison to negative $283 million a year before.
