Deepwatch, a cybersecurity firm specializing in AI-powered threat detection, laid off between 60 and 80 employees Wednesday - nearly a third of its 250-person workforce. CEO John DiLullo told TechCrunch the cuts will "accelerate our significant investments in AI and automation," joining a wave of cybersecurity companies restructuring around artificial intelligence despite strong industry fundamentals.
Deepwatch just became the latest cybersecurity company to slash jobs in the name of AI transformation. The Denver-based firm, which already markets an "AI-powered detection and response platform," cut between 60 and 80 positions Wednesday - representing up to 32% of its roughly 250-employee workforce.
CEO John DiLullo framed the cuts as strategic repositioning, telling TechCrunch the company "is aligning our organization to accelerate our significant investments in AI and automation." But the scale of the reduction suggests something more dramatic than typical workforce optimization.
The layoffs hit hardest among security analysts and operations staff - the very humans Deepwatch's AI is supposedly designed to augment, not replace. A current employee, speaking anonymously to TechCrunch, dismissed the AI rationale as corporate speak: "They're doing something with AI and agentic AI but it sounds like bullshit."
That skepticism reflects growing tension across cybersecurity about AI's real versus hyped capabilities. While machine learning excels at pattern recognition and threat correlation, human expertise remains crucial for investigation, response coordination, and complex decision-making. Deepwatch's bet is that AI automation can handle more of the security operations center workload than competitors believe possible.
The timing amplifies questions about the cybersecurity job market's stability. CrowdStrike cut 500 workers in May despite posting "operating cash flow of $1.38 billion and record full year free cash flow of $1.07 billion," according to company filings. Other firms including Deep Instinct, Otorio, ActiveFence, SkyBox Security, and Sophos have also trimmed staff this year.
This wave contradicts the industry's public narrative about talent shortages and explosive growth. Cybersecurity spending continues climbing as organizations face escalating threats, but companies are increasingly prioritizing AI-driven efficiency over human headcount. The shift mirrors broader tech industry trends where automation justifies workforce reductions even during profitable periods.
For Deepwatch specifically, the cuts signal either confidence in AI's ability to handle complex security operations or financial pressure requiring dramatic cost reductions. The company's managed detection and response platform competes against giants like IBM, Microsoft, and CrowdStrike - all investing heavily in AI-powered security tools.
Eight former Deepwatch employees confirmed their layoffs on LinkedIn, with some posts suggesting the cuts weren't performance-based but purely strategic. The LinkedIn announcement mentioning 80 affected workers aligns with the anonymous employee's estimate, indicating the higher end of the reported range.
What makes this particularly notable is Deepwatch's positioning as an AI-first security company. If a firm already built around artificial intelligence needs to cut this deeply to fund further AI development, it suggests either the technology isn't delivering expected efficiencies or the competitive pressure to advance AI capabilities has intensified dramatically.
The layoffs also raise questions about customer service continuity. Security operations require 24/7 monitoring and rapid incident response - areas where human expertise and institutional knowledge matter significantly. Deepwatch will need to prove its remaining team plus enhanced AI can maintain service levels that justified its previous staffing.
Deepwatch's substantial workforce reduction represents more than cost-cutting - it's a high-stakes bet that AI can fundamentally reshape cybersecurity operations. Whether this proves visionary or premature will depend on the technology's ability to match human expertise in complex threat scenarios. For the broader industry, it signals an accelerating shift toward automation-first security models, even if the human cost remains significant. Other cybersecurity firms will be watching closely to see if Deepwatch's AI gamble pays off or becomes a cautionary tale about moving too fast on unproven technology.
