Israeli tech giant Wix will lay off 20% of its employees, CEO Avishai Abrahami announced in a Thursday X/Twitter thread, citing financial difficulties due to the recent strengthening of the shekel against the dollar.
"We are reducing the Wix team size by roughly 20%. It is one of the hardest decisions I have had to make, but I am confident it is the right one, and I will explain why," Abrahami wrote in a letter that was also shared with all of the company's employees.
According to his assessment, the fact that the company has shekel-dominated costs and dollar-denominated revenue made it impossible to keep its current operations running without cutting some of its Israeli operations.
"This creates a structural pressure on our ability to operate at our current scale. It is a reality that directly shapes what is sustainable for our company," he added.
The second reason stems from Wix's recent use of artificial intelligence for several tasks, which made some positions at the company redundant, with those employees replaced by automated agents.
According to Abrahami, the company is now introducing new positions, such as "Xengineer and Creators," whose roles were "designed from the ground up around AI-native ways of working." But these new positions require a "faster-moving structure" than what Wix has been using.
AI pushing Wix towards layoffs
"We are moving to a structure with fewer levels between any member of our leadership and the most junior person on the team. Fewer layers means faster decisions, clearer ownership, and less distance between the people setting direction and the people building the product - but it also means a smaller number of people," Abrahami explained.
He also added that the company is "choosing to compete" in an era when companies need to take on risk, invest in AI, or risk "falling behind."
"To those of you who are being let go, I want to once more say: Thank you," he wrote, adding that every person being let go would be personally contacted, and his situation would be handled by the company "with sensitivity, respect, and the care you deserve, you will also be granted personally curated separation packages."
Shekel-dollar crisis hits high-tech sector
Wix becomes the first victim of the "shekel-dollar crisis," with many analysts noting that companies based in Israel with returns in dollars (as is the case for many high-tech startups and firms) might be hit hard by the current strengthening of the Israeli currency.
While many companies were able to overcome it by hedging their dollar transactions, this strategy would only solve the problem in the short term.
Venture Capital Michael Eisenberg, who works as a managing partner at the Israeli VC firm Aleph, told Walla that he has been pushing companies to hedge their funds, which would allow them to set the exchange and avoid liquidity problems if they needed to convert those funds to shekels.
Hedging dollar transactions and currency transactions in general is a financial tool used by companies that helps establish stable exchange rates for buying and selling currencies, providing greater stability and predictability.
"Every 10% shift in the shekel-dollar exchange rate removes between 150 and 200 months of runway among our portfolio companies that did not hedge the dollars they raised," Eisenberg said.
The Bank of Israel, which serves as Israel's central bank and sets the country's interest rates, lowered rates on Tuesday in an effort to weaken the shekel, boosting sectors highly dependent on exports.
But the move didn't accomplish its objective, with the shekel registering another round of strengthening, with the shekel-dollar exchange rate down 1.651% at NIS 2.859/$ and down 1.571% against the euro at NIS 3.326/euro.
In late-afternoon interbank trading, the shekel strengthened a further 1.02% to NIS 2.824/$ and a further 1.43% against the euro to NIS 3.301/euro.
Tzally Greenberg and Eitan Gerstenfeld/Globes/TNS contributed to this article.