Cloud-based file sharing provider Dropbox Inc. today announced plans to let go 500 employees, or about 16% of its workforce.

Affected employees will receive 16 weeks of severance pay and one more week of pay for every year they worked at the company. Additionally, Dropbox will continue to provide health insurance for six months. The company also plans to accelerate stock vesting for the affected employees, as well as offer access to free job placement and career coaching services.

In an internal memo, Dropbox Chief Executive Officer Drew Houston wrote that there are two main drivers behind the workforce reduction.

The first factor cited by the CEO is the company’s slowing revenue growth. “While our business is profitable, our growth has been slowing,” Houston wrote to employees. “Part of this is due to the natural maturation of our existing businesses, but more recently, headwinds from the economic downturn have put pressure on our customers and, in turn, on our business.”

Dropbox’s revenue reached $598.8 million in the fourth quarter after growing 5.9% on a year-over-year basis. The same time 12 months earlier, the company posted 12.7% year-over-year growth. “Some investments that used to deliver positive returns are no longer sustainable,” Houston wrote in the memo.

The other driving factor behind the workforce reduction is Dropbox’s growing focus on artificial intelligence. This year, Houston hinted, the company plans to extend its cloud platform with new AI capabilities. To support the effort, the company is adjusting its development teams.

“Our next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development,” Houston detailed. “We’ve been bringing in great talent in these areas over the last couple years and we’ll need even more.”

As part of the initiative, the company is reorganizing its file sharing and document management businesses. The latter unit, which Dropbox built partly through startup acquisitions, provides software that eases tasks such as drafting sales agreements. It will also reorganize the business teams that support its product development group.

In a regulatory filing, Dropbox stated that it will reinvest some of the savings from the workforce reduction into “future growth initiatives, and will continue to hire for roles critical to those initiatives.” The filing also disclosed that the company expects to take a charge of $37 million to $42 million in connection with the layoffs. It will incur the bulk of the charge by the end of this quarter.

In conjunction with the announcement of the layoffs, the company reaffirmed its quarterly guidance. Dropbox in February projected that it would generate revenue of $600 million to $603 million during the three months ended March 31. The company is set to report quarterly earnings after the closing bell next Thursday.

Image: Dropbox