Zynga said it expects the move to save about $70 million to $80 million in annual costs. But the San Francisco-based company behind "FarmVille" and "Words With Friends" also now expects a worse loss in the second quarter than it previously anticipated, as well as weak bookings, which will weigh on future revenue.
Zynga's stock plunged 12 percent to close at $2.99 on the Nasdaq stock market after trading was halted twice on Monday. Its shares have traded below $4 since about July 2012, after debuting at $10 in its December 2011 initial public offering.
The cost-cutting, which also includes some office closures, is "proactive" and done from a position of financial strength, Zynga CEO Mark Pincus said in a blog post.
"By reducing our cost structure today we will offer our teams the runway they need to take risks and develop these breakthrough new social experiences," he said.
Zynga said it now expects a net loss in the quarter through June of $28.5 million to $39 million, worse than its estimate for a net loss between $26.5 million and $36.5 million it predicted at the end of April.
It also said bookings, which reflect in-game purchases of virtual goods, would come in at the lower end of its previously estimated range between $180 million and $190 million.
Analyst Michael Pachter of Wedbush Securities said investors are more concerned about lackluster revenue than any savings from the cuts.
"You can't save your way to prosperity," he said. "The market is telling you that it's not confident that revenues are going to grow."
Before the announcement, analysts polled by FactSet were already forecasting that annual revenue for Zynga would shrink to $944 million by the end of the year, down from $1.28 billion in 2012.
The cuts come on the heels of earlier efforts to reduce overhead as demand for its games on the social-networking site Facebook fades and more people shift to playing games on mobile devices, where the company finds it more difficult to generate revenue.