The company said it would eliminate 173 of its 420 positions, closing its offices in London and San Francisco. SoundCloud is based in Berlin and will maintain a second office in New York.
Founded in 2008, SoundCloud lets users upload music files easily, making it a go-to site both for stars who decide to share tracks for free and emerging artists looking for hassle-free promotion.
SoundCloud has signed deals with major labels but has struggled to monetize its model. Talks failed both with Twitter and streaming leader Spotify to acquire and incorporate the site.
Co-founder and CEO Alex Ljung said SoundCloud had more than doubled its revenue in the past year but needed to take "tough decisions" to ensure its long-term health as an independent site.
The company's future path "requires cost cutting, continued growth of our existing advertising and subscription revenue streams, and a relentless focus on our unique competitive advantage - artists and creators," he wrote in a blog post.
"By reducing our costs and continuing our revenue growth, we're on our path to profitability and in control of SoundCloud's independent future," he wrote.
Streaming, which allows listeners to choose music on-demand online, has been growing rapidly and has led to two years of healthy growth globally for the recorded music industry after decades of decline or stagnation.
But streaming companies themselves are still fine-tuning their business models. Spotify, despite a fast-growing subscriber base, has held off on a long-rumored public offering.