Microsoft has begun laying off approximately 6,000 workers, nearly 3% of its total workforce, as it redirects funds toward artificial intelligence (AI) development.
This marks the company’s largest round of job cuts in over two years, with the layoffs affecting various levels, teams, and regions globally.
The state of Washington, where Microsoft is headquartered, was particularly impacted, with 1,985 workers being laid off from the company’s Redmond offices, including many in software engineering and product management roles. Although the layoffs span multiple departments, the company has emphasized that reducing the number of managers will be a key focus. The affected employees began receiving their notices on Tuesday.
Despite the scale of these job cuts, they come shortly after Microsoft reported robust sales and profits for the January-March quarter, surpassing Wall Street’s expectations. This news provided some relief to investors during a period of uncertainty in both the tech sector and the wider US economy.
“I think many people have this conception of layoffs as something that struggling companies have to do to save themselves, which is one reason for layoffs, but it’s not the only reason,” said Daniel Zhao, lead economist at Glassdoor. “Big tech companies have trimmed their workforces as they rearrange their strategies and pull back from the more aggressive hiring that they did during the early post-pandemic years.”
Microsoft had 228,000 full-time employees as of June last year, with around 55% based in the US. The current layoffs follow a smaller, performance-based reduction in January. At 3%, this round of job cuts is the largest since the company let go of 10,000 workers, or nearly 5% of its workforce, earlier in 2023, as part of a broader tech industry trend to scale back post-pandemic expansion.
Amy Hood, Microsoft’s CFO, explained on an earnings call in April that the company is focused on “building high-performing teams and increasing our agility by reducing layers with fewer managers.” She added that the headcount in March was 2% higher compared to the previous year, though slightly lower than at the end of 2023.
The layoffs are spread across various segments of Microsoft’s business, including Xbox, the gaming platform, and LinkedIn, the career networking site. Some affected employees and executives publicly expressed their feelings on LinkedIn. Scott Hanselman, a vice president of Microsoft’s developer community, shared his emotional response, writing, “This is the first time I’ve had to lay people off to support business goals that aren’t my own… These are people with dreams and rent and I love them and I want them to be OK.”
Microsoft did not provide a detailed explanation for the layoffs, stating only that they are part of “organizational changes necessary to best position the company for success in a dynamic marketplace.”
As part of its ongoing AI investments, Microsoft has committed $80 billion (€71.4bn) for infrastructure, including data centers, to support the development of its AI technology, although some of these projects have been scaled back. The company has increasingly integrated AI into its operations, and these tools are being promoted as revolutionary for how work is done across industries, including within Microsoft itself.
In a recent discussion with Meta CEO Mark Zuckerberg, Microsoft CEO Satya Nadella remarked, “maybe 20-30% of the code” for some of Microsoft’s coding projects “are probably all written by software.”
While AI continues to play a larger role in Microsoft’s operations, it remains unclear whether AI is the main driving force behind the company’s decision to reduce its human workforce.
