Search AI company Elastic has announced layoffs this week, putting artificial intelligence investments front and center as the leading reason for the cuts. This restructuring at Elastic is expected to affect 7% of its workforce, according to CEO Ashutosh Kulkarni, who released the details online. The cuts have been planned on a smaller scale than the layoffs from back in December 2022, where 13% of the workforce was let go. The sting of the release from service will be painful for affected workers, nonetheless. Ash Kulkarni’s announcement ties the workforce reductions to industry advancements in AI and automation, and the company’s prime position to make the most of the direction the industry is headed in.
Elastic layoffs to affect 7% of the workforce as the company turns to “a simpler structure, with fewer layers, less complexity, and less friction.” (Image: Pexels)
Elastic Layoffs to Eliminate 7% of Its Headcount as AI Takes the Fall Once More
Elastic, the provider of services like Elasticsearch and Kibana, announced that it was disappointed to let go of the workers who had helped build the organization and contributed meaningfully to its operations, but the company was in a unique position to lead the industry with a leaner structure. Discussing the reasons for the layoffs, Elastic explained that the restructuring was targeted towards establishing “a simpler structure, with fewer layers, less complexity, and less friction.” These simplified structures are to be accompanied by changes in its approach to innovation and investments in newer skills more relevant to its growth.
In areas like sales and other customer-facing operations, the organization expects to grow its team and evolve its human-centric capabilities to meet the needs of the market. In other areas, leaner teams were the preferred modus operandi. Besides the layoffs, the company also made note of its changes to operations, particularly in engineering, where teams will be simplified into three core areas, all led by senior leaders who will report to the CEO directly. “That means fewer layers, broader ownership, clearer accountability, and a sharper focus on the skills we believe matter most for what’s ahead,” Ash Kulkarni explained in the announcement.
Elastic Emphasises That the Layoffs Are a Sign of Confidence in the Business, Not a Retreat from It
The company clarified that the changes are not a result of lackluster results but instead stem from a desire to grow along with the industry rather than resist the changes occurring today. Elastic’s Q4 FY 2026 results announced last month showed a total revenue of $451 million, which marks a 16% increase YoY, which adds credence to the statement. Reports suggest that the company anticipates non-recurring cash charges of $22 million to $25 million primarily due to severance costs, which should be recognized in the first quarter of fiscal 2027 and beyond.
The CEO added that he expects the company headcount to grow year-over-year this fiscal year, which may be a reassuring sentiment for the employees that remain, but doesn’t benefit those hit hardest by the news. No details regarding severance pay have been shared publicly as the CEO has before. In a previous round of layoffs in 2022, the company offered employees 14 weeks of severance at minimum, adding an additional week of pay for each full year of service. Employees also received six months of health care premiums and payouts of unused PTO days, along with other assistance in determining their path forward.
AI Progress Or AI Washing? Many Remain Suspicious of AI-Motivated Cuts
The Elastic layoffs join a long list of tech companies having opted to go down the same route, eliminating jobs to optimize operations wherever possible. There is evidence to suggest that organizations are indeed seeing a reduced need for a large workforce when smaller teams can operate more efficiently with AI. However, the conversation around artificial intelligence also suggests that there are limitations to the technology that are being overlooked to avoid reporting on other issues within operations. Online boards continue to showcase discussions of growing disbelief surrounding the link between AI and layoffs.
As we’ve seen with Ford recently, the company hired many of its engineers back onto the team after automated systems generated errors and flawed results that needed fixing. This story isn’t exclusive to the company alone. As technology becomes increasingly central to daily workplace routines, providing quantifiable, clear data and evidence to showcase its benefits to the organization can help bring both the workforce and customers on board with the technology.
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