WeWork issues glum revenue forecast as tech layoffs hurt
By Kannaki Deka
(Reuters) - WeWork Inc on Thursday forecast lower-than-expected revenue for the current quarter, signaling that its business of providing flexible workspace was feeling the heat of mass layoffs in the technology sector.
Shares of WeWork fell 5.5% in morning trade, after the company forecast current-quarter revenue of $830 million to $855 million, below analysts' expectations of $918.4 million.
Workforce reductions undertaken by several companies across the United States have hit certain locations, WeWork Chief Executive Officer Sandeep Mathrani said on a post-earnings call.
Big Tech firms and Wall Street titans are leading a string of layoffs across corporate America as companies look to rein in costs to ride out 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 company, which offers workstations, private offices and customized floors, had enjoyed a pandemic-driven shift to flexible work outside traditional offices, but is now bracing for a fallout from a potential slowdown in the economy.
The office-sharing firm, which went public 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 2022.
For the fourth quarter ended Dec. 31, the New York-based company posted revenue of $848 million, below expectations of $873.8 million, according to the mean estimate from five analysts, based on Refinitiv data.
Its adjusted EBITDA for the fourth quarter was negative $26 million, compared with negative $283 million a year ago.
(Reporting by Kannaki Deka in Bengaluru; Editing by Janane Venkatraman and Anil D'Silva)