Snap Inc. CEO Evan Spiegel told staff in a memo on Wednesday that the company will undergo a major restructuring that includes a 20% reduction of its workforce and product pullbacks it anticipates will help save $500 million this quarter.

Why it matters: Shares in Snap have taken a plunge following a weak Q2 earnings report that came as a result of advertising headwinds attributed to macroeconomic trends, such as inflation and supply chain issues.

• Snap has lost nearly 80% of its market value since the beginning of the year.
• On Tuesday, two of Snap's top ad executives announced they were departing the company to run Netflix's new advertising business.

Details: In the memo, Spiegel said the company would be laying off 20% of its staff, which would amount to over 1,200 employees.

• The company is going to double down on three strategic priorities, including community growth, revenue growth and augmented reality, which means it will be pulling back on its investment in some of its key products as it focuses on streamlining costs.
• In a regulatory filing published in conjunction with the memo, Snap said it anticipates $500 million in cost savings relative to Q2 2022 thanks to the new measures taken.
• It also noted that Snap's year-over-year quarterly revenue growth is approximately 8%. Snap didn't offer third quarter guidance when it reported its second quarter earnings, causing skepticism on Wall Street.

Snap plans to discontinue investments in some Snap Original shows, games, its new selfie drone called "Pixy" and "Minis," tools introduced in 2020 that allow users to integrate experiences with apps outside of Snap while using Snapchat.

• Snapchat will continue to honor recent deals made to fund Snap Originals with various publishers, and it will also continue to support its flagship show, Good Luck America. It will halt most new investments in original shows.
• Publishers that fund their own Snapchat shows, like NBC News' "Stay Tuned" show, will remain on the platform.

Between the lines: In addition to those changes, Snap is restructuring its leadership to promote Jerry Hunter, Snap's current senior vice president of engineering to chief operating officer.

• Snapchat will restructure its monetization efforts under Hunter.
• The company has hired Ronan Harris from Google as its new president of the EMEA region, beginning in October. The company is searching for presidents for its APAC and Americas regions, Spiegel said.

What they're saying: "The investments we have made in our business to-date assumed a higher rate of revenue growth based on our vast opportunity and our proven history of execution, including 2x growth in the size of the Snapchat community and 10x growth in trailing twelve month revenue since our IPO in 2017," Spiegel said in the memo.

• "Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses. While we have built substantial capital reserves, and have made extensive efforts to avoid reductions in the size of our team by reducing spend in other areas, we must now face the consequences of our lower revenue growth and adapt to the market environment."

What's next: Spiegel said he plans to host a company-wide presentation tomorrow detailing these changes to staff.

• Departing employees in the U.S. will receive severance packages that include at least four months of pay, accelerated equity vesting, health care coverage through January and access to mental health benefits.