The music streaming giant Spotify has announced it's cutting 17% of its workforce in a dramatic move aimed at slashing costs.

In a memo addressed to staff, CEO Daniel Ek said it was critical that the company "rightsize" its financial situation after hiring too many people in 2020 and 2021, when capital was cheaper.

"The Spotify of tomorrow must be defined by being relentlessly resourceful in the ways we operate, innovate, and tackle problems," Ek wrote. "This kind of resourcefulness transcends the basic definition — it's about preparing for our next phase, where being lean is not just an option but a necessity."

The round of cuts — the third this year — equates to about 1,500 jobs, according to a CNBC source that said the Swedish company currently employs about 9,000 people across more than 40 global office locations.

Across the tech industry, tens of thousands of positions have been cut in the last year as a pandemic-era boon continues to fade. According to the tech job tracker layoffs.fyi, more than 250,000 tech workers have been laid off since the start of the year.

Still, the size of the Spotify cuts may feel "surprisingly large" for the moment, Ek wrote.

The company posted $34 million in operating income during its third-quarter earnings call, its first quarterly profit since 2021. Lower personnel costs, driven by two smaller rounds of cuts, was one of the cost-saving factors.

The company cut 6% of its workforce, about 600 employees, in January. It laid off another 2% of staff, roughly 200 roles, in June.

At the same time, Spotify has raised prices on its subscription plans and has launched new expansions in audiobooks and podcasts. It set a goal to reach a billion users by 2023, and currently has over 570 million of them. That's a little less than double the number of listeners the platform attracted in 2020.

As of 8:30 a.m., the company's shares were up about 5% in premarket trading.

Departing employees will be offered approximately five months of severance pay plus healthcare coverage, vacation pay, immigration support and two months' worth of career-search assistance, according to Ek's statement.

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