Deepwatch Cuts 80 Jobs as Cybersecurity Firm Accelerates AI Investment Push

Cybersecurity firm Deepwatch laid off 80 employees on November 12, 2025, as part of a strategic workforce reduction aimed at accelerating artificial intelligence investments. The Denver-based company, which specializes in managed detection and response services, cited the need to realign resources toward AI-driven security solutions as the primary driver behind the layoffs. The move affects approximately 15% of Deepwatch's workforce and reflects broader industry trends toward automation in cybersecurity operations.

Context of the Decision

The Deepwatch layoffs stem from the company's strategic pivot toward AI-powered cybersecurity solutions, a shift that has become increasingly common across the tech sector. Like many cybersecurity firms, Deepwatch expanded rapidly during the pandemic as organizations rushed to secure remote work environments. However, the current market demands more efficient, automated security solutions that can handle growing threat volumes without proportional increases in human analysts.

The workforce reduction allows Deepwatch to redirect capital from personnel costs toward research and development of AI-enhanced threat detection capabilities. This restructuring reflects the company's recognition that traditional security operations centers require significant technological upgrades to remain competitive in an increasingly automated marketplace.

Impact on Operations

The layoffs primarily affected Deepwatch's security operations center analysts and support staff, with the company maintaining its core engineering and product development teams. Multiple locations were impacted, including the company's primary facilities in Denver and Austin, as well as satellite offices supporting 24/7 security monitoring operations.

Customer-facing services are expected to continue without interruption, as Deepwatch has been gradually implementing AI-assisted tools to augment human analysts over the past year. The company indicated that automated threat detection and response capabilities will compensate for the reduced headcount while potentially improving response times and accuracy.

Company Financial Background

Deepwatch has raised over $100 million in funding since its founding, with its most recent Series C round in 2023 valuing the company at approximately $500 million. The firm serves mid-market and enterprise clients across various industries, providing managed security services that compete with larger players like CrowdStrike and SentinelOne.

Despite steady revenue growth, Deepwatch faces pressure from investors to improve operational efficiency and demonstrate clear paths to profitability. The cybersecurity market has seen increased scrutiny of unit economics, particularly for service-heavy business models that require significant human capital investments. The company's decision to reduce workforce while investing in AI capabilities aligns with investor expectations for more scalable business operations.

Industry Outlook

The Deepwatch layoffs reflect broader workforce reduction trends across the cybersecurity sector, where companies are balancing growth investments with operational efficiency demands. Major competitors including Rapid7, Varonis, and Cybereason have announced similar restructuring initiatives throughout 2025, citing market consolidation and the need for AI integration.

The managed detection and response market continues growing, driven by increasing cyber threats and regulatory compliance requirements. However, client expectations have shifted toward platforms offering automated threat hunting and response capabilities rather than purely human-driven analysis. This technological evolution has created pressure for traditional security service providers to reduce labor costs while enhancing their AI and machine learning capabilities.

Industry analysts project that cybersecurity firms successfully integrating AI into their service delivery models will capture disproportionate market share over the next three years, making workforce restructuring a strategic necessity rather than purely cost-cutting measure.

Conclusion

Deepwatch's decision to lay off 80 employees represents a calculated strategic shift toward AI-enhanced cybersecurity services rather than financial distress. The workforce reduction positions the company to compete more effectively in an increasingly automated security landscape while potentially improving service delivery through technological advancement.

The layoffs signal Deepwatch's commitment to evolving beyond traditional managed security service models toward more scalable, technology-driven solutions. Success will depend on the company's ability to execute its AI investment strategy while maintaining service quality during the transition period. This restructuring may ultimately strengthen Deepwatch's competitive position if the AI initiatives deliver the promised operational improvements and cost efficiencies.