Microsoft’s Redmond headquarters is once again under threat from layoffs. According to a spokeswoman, the company has announced that it is laying off 3% of its global workforce, which will affect teams in all departments, positions, and geographical areas.
Over 6,800 persons are impacted by this cut, which affects over 228,000 employees globally.
Microsoft stressed that, contrary to what news headlines may lead readers to believe, these layoffs are not related to employee performance or the use of AI by employees rather than their own labour.
Officially, this is the biggest layoff cycle since 2023. Although the firm has previously reduced its workforce in the past year—it laid off 1,900 employees from Activision Blizzard and Xbox in September, and another 1,500 employees from Azure, HoloLens, and other divisions—this most recent round is particularly noteworthy.
Since Microsoft cut off 10,000 workers in a single wave at the beginning of 2023, this appears to be the largest personnel decrease to date.
The layoffs at the time were a part of a larger reorganisation initiative that was linked to slower development in sectors other than the rapidly expanding artificial intelligence industry.
In order to reduce overlapping roles, Microsoft acknowledged that it had to reevaluate team structures and goals after the Activision Blizzard merger. You and your coworkers were in trouble if your department had nothing to do with artificial intelligence.
Cutting management to make things go more quickly
The spokeswoman clarified, “We’re continuing to make the organisational changes needed to help the company succeed in an evolving market.” Reducing management levels and simplifying the organization’s structure are important components of that strategy.
This strategy is not exclusive to Microsoft; Amazon has also lately eliminated a number of management tiers that it deemed to be superfluous.
Considering the impressive financial outcomes, this was an unexpected move. The layoffs’ timing is remarkable because they occurred just weeks after Microsoft reported profitability that exceeded projections.
The company’s cloud computing sector performed exceptionally well, contributing to its $25.8 billion net income for the most recent fiscal quarter.
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The rising demand for AI-driven services was a major factor in Azure’s contribution to those figures. In addition to exceeding expert forecasts, these outcomes offered investors more assurance over Microsoft’s expansion plan.
Microsoft CEO Satya Nadella informed analysts back in January that the company would change its sales tactics after Azure’s cloud revenue, excluding services tied to artificial intelligence, fell short of projections. In the meantime, the AI cloud industry’s growth exceeded the company’s own projections.
Microsoft’s stock reached its highest close of the year on Monday, closing at $449.26. The stock is still only a little below its peak of $467.56, which it hit last July.
The show must continue
Microsoft is continuing to pursue its largest tech investments in spite of the layoffs. If this staff decrease had a negative impact on its performance, only time will tell.
With plans to invest $80 billion in data centres by 2025 and expand its AI-powered Copilot across Microsoft 365, Azure, and Dynamics 365, the business is currently doubling down on AI and cloud.
On Project Stargate, a $100 billion mega data centre that will house a cutting-edge AI supercomputer by 2028, the business is also collaborating with OpenAI.
With the next generation of artificial intelligence infrastructure, Microsoft wants to be at the top.
Microsoft is adopting a multiplatform strategy in gaming, which is a very profitable area for the firm. Games like Sea of Thieves will be available on the PlayStation and Nintendo Switch, but fans will have to wait until 2026 for the much-anticipated Fable relaunch.
In the meanwhile, the business is working to make quantum technology more accessible by developing the Majorana 1 processor.
