Dropbox, the popular file hosting service, is undergoing a significant change as it lays off around 500 employees, which amounts to roughly 16% of its entire workforce. According to a memo from CEO Drew Houston, this move is a response to a rocky economy, but also a means to help the company build out its AI division.

Houston states that while the ideal scenario would be to move employees from one team to another, the next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development. As such, the company has been bringing in great talent in these areas over the last few years, and it will need even more in the future.

The CEO notes that Dropbox will consolidate its core and document workflow businesses and adjust its product development teams as part of this change. Despite the rough economic times, Houston states that Dropbox is still profitable, and the job cuts are part of the “natural maturation” of the business.

Houston is determined to ensure that Dropbox is at the forefront of the AI era, just as it was at the forefront of the shift to mobile and the cloud. He believes that machine intelligence will give the company the tools to reimagine its existing businesses and invent new ones. While Dropbox has introduced some AI-powered features over the years, such as automatic text recognition, laying off employees to replace them with those with AI experience shows the company is serious about making a shift into the industry.

The affected employees will receive a minimum of 16 weeks of pay, up to six months of healthcare, and the ability to keep company devices for personal use. They’ll also receive career coaching and job placement support.

The move towards AI has been a focus for Dropbox for some time, with a 2018 letter from Houston and co-founder Arash Ferdowsi highlighting that “machine intelligence” would eventually allow the company to better understand and serve its customers. Now, the company appears to be taking significant steps toward making this vision a reality.