Layoffs driven by AI investments will affect more than 6,000 employees.
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In a move to signal a critical strategic pivot, Microsoft today announced its workforce cuts with more than 6,000 employees.
This kind of news often raises concerns about artificial intelligence automation and job movement, but the company has given a different rationale. This tuning is a computational step to optimize resources and ensure a continuous robust investment in Microsoft’s fast-growing AI platform. Decisions that streamline specific operations (and create the ultimate impact) are designed to free up capital to promote the company’s AI-centric strategy.
“We have invested heavily in AI because we are optimistic about what we can do to support people, industries and society, and we are committed to bringing together technology and people to fulfill our AI promises responsibly,” the company previously shared on its website.
Microsoft moves towards AI
Reuters reports that the company has cut staff, not the AI technology itself, but the investment in new AI initiatives. But CEO Satya Nadella told Silicon Valley viewers, “20, 30% of the code inside our report today, and some of our projects, are probably all written by software.” In that same conversation, on stage with Meta CEO Mark Zuckerberg, Nadella described her vision for Microsoft as a “distillation factory.” There, we employ large, generic AI models and scale them down to smaller, specialized, and even task-specific models. Nadella often talks about “democratization of AI” and his technological plans. In fact, efforts are underway to target businesses using AI-powered tools and platforms. It incorporates AI capabilities into flagship products such as Microsoft 365, Azure, and Dynamics365.
And Wall Street responded positively. Microsoft’s total profit margins have been consistently in the 70% range of the 60s low over the past few years, and stocks have become a favorite for institutional investors. On Monday, Microsoft stock closed at $449.26, the highest price ever this year. (They recorded $467.56 last July). The company recently reported revenue of $70.7 billion in quarterly revenue, falling below Wall Street expectations. For comparison, Nadella says the company will spend $80 billion in fiscal year 2025 on AI-related initiatives.
Will there be more layoffs in the future for Microsoft?
Analyst Gil Luria says he suggests that cuts are a natural result of such types of capital investment numbers, and that more layoffs may be ahead. “We believe Microsoft is investing every year at its current level. We believe we need to cut at least 10,000 people to compensate for the higher depreciation levels for capital expenditure,” Royer said.
The displaced people include approximately 1,985 workers from Washington, which is headquartered. Overall, the company has 228,000 workers. Layoff news for these layoff workers is not easy as the tech layoff trend continues.
Corrected, May 14: Previous versions of this article misinterpreted the number of Microsoft employees that could be reduced. Over 6,000 or less than 3% of the company’s workforce.
