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Microsoft Announces Workforce Reduction Amid AI Investment
Microsoft is reducing approximately 3% of its worldwide workforce as the corporation redirects additional resources toward the competitive field of artificial intelligence (AI) development, the company confirmed on Tuesday. These layoffs come as Microsoft increases investment in AI technology.
Impact of the Layoffs
The workforce reduction will likely affect roughly 7,000 positions across all divisions and locations of Microsoft’s global operations, the technology conglomerate stated. As of last June, the company, under the leadership of CEO Satya Nadella, employed 228,000 individuals globally.
“We are continuing to implement necessary organizational realignments to optimally position the company for success within a dynamic market environment,” a Microsoft representative conveyed in a statement initially obtained by CNBC.
According to the spokesperson, the layoffs are partially designed to streamline managerial layers within Microsoft.
The announcement of these cuts occurred shortly after Microsoft reported quarterly revenue of $70.07 billion, exceeding Wall Street projections.
Representatives from Microsoft have yet to respond to requests for additional comments.
Recent Restructuring
These upcoming layoffs represent the most substantial workforce adjustment at Microsoft since January 2023, when the firm eliminated 10,000 positions. Earlier in the year, the company also implemented a smaller series of performance-based personnel reductions.
The company’s stock performance remained steady in Tuesday trading.
The AI Race and Microsoft’s Position
Microsoft, a major supporter of OpenAI, is intensely competing with companies such as Elon Musk’s xAI, Mark Zuckerberg’s Meta, Google, and other enterprises involved in developing AI applications.
- Increased investment in AI: Nadella’s firm has indicated it will allocate up to $80 billion in fiscal year 2025 solely toward AI-related initiatives
Analyst Perspectives
D.A. Davidson analyst Gil Luria recently posited that layoffs would be essential for Microsoft to offset the high costs associated with advancing AI.
“We anticipate that with Microsoft’s current level of investment, it would be necessary to reduce headcount by a minimum of 10,000 annually to compensate for increased amortization levels related to their capital expenditures,” Luria stated, as reported by Reuters.
Industry-Wide Trend
Microsoft is not alone in making workforce adjustments. In January, Meta reduced its workforce by 5%, as Zuckerberg aimed to eliminate what he termed “low performers.”