(Reuters) – Microsoft said on Tuesday it has less than 3% of its employees or about 6,000 employees as technology giants hope to pay for costs while simultaneously dumping billions of dollars into its ambitious AI bets.
The cuts will take place at all levels and geographically, and may be the largest since Microsoft laid off 10,000 employees in 2023. The company has allowed a few employees to be on performance-related issues in January, but according to CNBC, the new cuts have nothing to do with that.
Big Tech has been spending a lot of time on AI as they see new technologies as the main growth engine while cutting costs for maintaining margins elsewhere. Media reports say Google has also abandoned hundreds of employees over the past year because it wants to control costs and prioritize AI.
“We continue to implement the necessary organizational changes to enable the company to best position for success in the dynamic market,” a Microsoft spokesperson said in an email.
As of June last year, the company had 228,000 workers, regularly using layoffs to prioritize staffing in its main focus areas.
Tuesday’s move comes weeks after Microsoft released its cloud computing business Azure and the blowout was stronger, causing a blowout in the latest quarter, a calm investor fears for uncertain economies.
However, the cost of scaling its AI infrastructure has put profitability seriously, and Microsoft Cloud Margins narrowed down to 69% in the March quarter from 72% a year ago.
Microsoft has designated $80 billion in capital expenditures this fiscal year, most of which are designed to expand data centers to simplify capacity bottlenecks for AI services.
DA Davidson analyst Gil Luria said the layoffs show that Microsoft manages the profit pressures generated by its increased AI investments.
“We believe Microsoft invests at current levels every year, which requires at least 10,000 reductions to compensate for the higher depreciation levels due to its capital expenditures,” he said.
(Reported by Aditya Soni and Akash Sriram in Bangalore; Editors of Shinjini Ganguli, Anil D’Ilva and Devika Syamnath)
