Bengaluru — Microsoft said on Tuesday it was laying off less than 3% of its workforce, or about 6,000 employees, as the technology giant looks to rein in costs while funnelling billions of dollars into its ambitious bet on artificial intelligence.
The cuts will be across all levels and geographies and are likely to be the largest since Microsoft laid off 10,000 employees in 2023. The company let a few staff go in January over performance-related issues, but the new cuts are not related to that, according to CNBC, which first reported the news.
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 artificial intelligence (AI), media reports have said.
“We continue to implement organisational changes necessary to best position the company for success in a dynamic marketplace,” a Microsoft spokesperson said.
The company, which had 228,000 workers by June last year, regularly uses layoffs to prioritise staffing in its main focus areas.
Tuesday’s move comes weeks after Microsoft posted stronger-than-expected growth in its cloud-computing business Azure and blowout results in the latest quarter, calming investor worries in an uncertain economy.
But the cost of scaling its AI infrastructure has weighed on profitability, with Microsoft Cloud margins narrowing to 69% in the March quarter from 72% a year ago.
Microsoft has earmarked $80bn in capital spending this fiscal year, with most of it aimed at expanding data centres to ease capacity bottlenecks for artificial intelligence services.
DA 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 to make up for the higher depreciation levels due to their capital expenditures,” he said.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.