Major layoff at Microsoft: 6,000 workers to be affected as big tech firm downsizes workforce by 3%

Microsoft has announced plans to cut its workforce by 3 per cent, affecting about 6,000 employees in a layoff drive that will be imposed across all teams and levels.

In a statement to CNBC, Microsoft said, “We continue to implement organisational changes necessary to best position the company for success in a dynamic marketplace.”

The latest firings come just months after the tech giant let a small number of staff go in January over performance-related issues. However, the recent job cuts are not based on the performance of employees.

The layoffs will take place despite Microsoft reporting better-than-expected quarterly net income of $25.8 billion. Big Tech has been spending heavily on AI as they see the new technology as a major growth engine, while slashing costs elsewhere to safeguard profit margins. Google has also laid off hundreds of employees in the past year, as it looks to control costs and prioritise AI.

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The company, which had 228,000 workers worldwide as of June last year, regularly uses layoffs to prioritise staffing in its main focus areas. Yesterday, Washington State said that Microsoft will be reducing the workforce of its Redmond headquarters by 1,985 people.

In January, Microsoft CEO Satya Nadella informed analysts that the company planned to adjust its sales strategy following weaker-than-anticipated growth in Azure cloud revenue unrelated to artificial intelligence. In contrast, AI-related cloud services exceeded the company’s internal expectations.

“How do you really tweak the incentives, go-to-market? 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,” Nadella said.

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Meanwhile, D.A. Davidson analyst Gil Luria said the layoffs showed Microsoft was “very closely” managing the margin pressure created by its heightened AI investments.

“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,” he said.

With inputs from agencies