Dropbox is laying off 20% of its workforce as the cloud company goes through what CEO Drew Houston calls a “transition period.”

In a letter to employees, Houston said the staff reductions would affect 528 people. The goal, he added, was to cut back on areas where Dropbox has “overinvested” while designing a “flatter, more efficient” team structure.

“As CEO, I take full responsibility for this decision and the circumstances that led to it, and I am truly sorry to those affected by this change,” he wrote. “This market is moving quickly and investors are pouring hundreds of millions of dollars into this space. This both validates the opportunity we have been pursuing and underlines the need for even greater urgency, even more aggressive investment and decisive action.”

According to a filing with the SEC, Dropbox estimates that it will spend a total of between $63 million and $68 million on the layoffs, primarily in the form of severance and benefits, and will incur between $47 and $52 million in additional costs acknowledge. The majority of the payouts will occur in the fourth quarter of 2024, while the remainder will be accounted for in the first half of 2025.

Affected employees will receive severance, stock and transition compensation, as well as certain health care benefits and employment services.

Dropbox has struggled to grow in recent months, losing market share to competitors including Box and Google Drive. In its most recent fiscal quarter, the company added just 63,000 new users — a fraction of its roughly 18 million users — while revenue growth slid into the low single digits.

In the second quarter, Dropbox had the slowest quarter of growth in its history, growing 1.9% year over year to $634.5 million. As of August, the company’s shares had lost more than 20% of their value year to date.

“We continue to see weakening demand and macroeconomic headwinds in our core businesses,” Houston wrote. “While I am proud of the progress we have made in recent years, in some parts of the business we are still not delivering at the level our customers deserve or performing in line with industry peers.”

The layoffs come a year after Dropbox laid off about 500 employees — and as the company increasingly invests in AI technologies. Dropbox recently expanded its AI-powered smart organization and search tool, Dropbox Dash, with business-focused features including data management controls.

In his letter, Houston said Dropbox plans to share more details about high-level changes and its 2025 strategy in the coming days.