As part of broader cost-cutting initiatives, Microsoft plans to terminate 10,000 employees, the company announced in a securities filing on Wednesday.
Microsoft CEO Satya Nadella noted that the company was not immune to a weakening global economy in remarks made prior to the news of layoffs at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday.
"No one can defy gravity and gravity here is inflation-adjusted economic growth," he told WEF founder Klaus Schwab via livestream.
Nadella also mentioned changing demand years for digital services years into the epidemic, as well as potential recession risks, in a memo to employees on Wednesday.
According to a U.S. Securities and Exchange Commission filing, Microsoft employed roughly 221,000 full-time employees worldwide as of June 30, 2022, with approximately 122,000 of those employees situated in the United States.
Nadella said the job cutbacks represent less than 5% of the business's overall personnel and will be completed by the end of its fiscal third quarter this year, which ends in March, making it the latest IT company to slash staff due to mounting economic uncertainties.
He stated that a $1.2 billion charge for "severance costs, changes to our hardware portfolio, and the cost of lease consolidation" will be taken by the company in the second quarter.
"These decisions are difficult, but necessary," Nadella wrote.
Since the beginning of the year, a number of tech companies have drastically reduced the size of their workforces as rising interest rates and consumer spending are both negatively impacted by inflation.
As individuals transition back to their offline lifestyles, the demand for digital services during the epidemic has also decreased.
Salesforce stated it is reducing its workforce by 10% while Amazon indicated it plans to lay off 18,000 employees. The largest employee cuts in business history-11,000-were recently revealed by Facebook's parent company Meta. Microsoft reportedly let go of under 1,000 workers across numerous businesses in October, according to Axios.
CEOs of tech companies, including Marc Benioff of Salesforce and Mark Zuckerberg of Meta, have placed the blame on themselves for overstaffing during the early stages of the pandemic and for failing to predict how the spike in demand for their products would subside once COVID-19 restrictions were lifted.
Nadella stated that despite making considerable cuts, Microsoft will continue to invest in "strategic areas for our future" and identified developments in artificial intelligence as "the next major wave" of computing. His message to the staff was published amid speculation that Microsoft will make a substantial investment in OpenAI, the company that created the AI chatbot ChatGPT.