Microsoft said Tuesday it will lay off approximately 7,000 employees-roughly 3% of its global workforce-as the company shifts resources to bolster artificial intelligence development and reduce organizational complexity. The move marks Microsoft's most significant workforce reduction since 2023.
"We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace," a Microsoft spokesperson said in a statement, confirming the cuts, which span all departments and geographies. The company had 228,000 employees globally as of June 2023.
The layoffs come just days after Microsoft reported quarterly revenue of $70.07 billion and net income of $25.8 billion, both exceeding Wall Street expectations. Despite the strong earnings, shares of Microsoft remained flat during Tuesday's session.
The job reductions are part of a broader strategy to streamline management layers and accelerate investment in advanced AI capabilities. Microsoft has committed up to $80 billion in AI-related capital expenditures for fiscal year 2025. CEO Satya Nadella has positioned the company as a frontrunner in the AI race, particularly through its partnership with OpenAI and ongoing competition with Meta, Google, and xAI.
In a recent statement to analysts, Nadella emphasized the importance of recalibrating sales execution strategies as cloud growth transitions toward AI. "How do you really tweak the incentives, go-to-market?" Nadella said. "At a time of platform shifts, you kind of want to make sure you lean into even the new design wins, and you just don't keep doing the stuff that you did in the previous generation."
D.A. Davidson analyst Gil Luria said Microsoft will need to continue reducing headcount to balance out capital expenditures tied to AI. "We believe that every year Microsoft invests at the current levels, it would need to reduce headcount by at least 10,000 in order to make up for the higher depreciation levels due to their capital expenditures," Luria said, according to Reuters.
The cuts announced Tuesday follow a smaller round of performance-based layoffs earlier this year and a broader reduction of 10,000 roles in January 2023. These latest cuts are not performance-related, the company clarified.
Other technology companies have made similar moves in recent months. Meta reduced 5% of its workforce in January, and Amazon cited "unnecessary layers" in its decision to cut staff. Last week, cybersecurity firm CrowdStrike announced a 5% reduction in its workforce.
