The maker of hit mobile video game Angry Birds, Rovio, will lay off 130 staff, it announced on Thursday.
The job cuts in Finland, which account for 16% of its workforce, will happen "sooner rather than later," said chief executive Mikael Hed on its website.
"We have been building our team on assumptions of faster growth than have materialised," he added.
Angry Birds is the number one paid mobile application of all time, according to Rovio.
The company has expanded the brand into a TV series, toys, clothing and an animated movie, which is expected to premiere in cinemas in the summer of 2016.
However, the firm has faced scrutiny after it reported its net profit had more than halved in 2013 compared to the previous year.
In August, Rovio said a former Nokia executive Pekka Rantala would become its next chief executive at the beginning of 2015.
News of the job cuts prompted a series of tweets from European Commission vice-president Neelie Kroes, who is responsible for the commission's digital agenda.
She called the move "sad news," saying such decisions were tough for all, but part of the "entrepreneurial challenge".
'Exploit' Angry Birds
Technology research firm IHS mobile analyst Jack Kent said Rovio might have trouble replicating the success it had enjoyed in the past.
"What we've seen from Rovio over the last few years is that it's very reliant on the Angry Birds brand.
"It hasn't really had much success with titles that don't use Angry Birds," Mr Kent said. "So, what it's really been doing is trying to exploit the Angry Birds success as much as possible."
The company, however, has had trouble retaining players for its Angry Birds titles.
In April, it said sales had stalled in 2013, growing just 2.6% from the previous year after three years of strong growth.
In June, it tried a new format for the brand with the launch of Angry Birds Epic - a role-playing adventure with turn-based battles rather than its traditional slingshot-themed gameplay.
It currently sits 83rd in Google Play's bestselling games chart, below the original Angry Birds title and the more recent Angry Birds Stella, which returned to catapult mechanic.
Mr Kent added that it could be difficult for Rovio to break back into the top of the industry now dominated by competitors like Finland's Supercell, maker of Clash of Clans, and London-based King, which develops Candy Crush Saga.
"The hits-driven nature of the mobile games business and that concentration at the top makes it hard for anyone else to reach the top of the charts," Mr Kent said.