Layoffs: Microsoft Announces Another Round Of Job Cuts, To Trim Nearly 6,000 Roles

Microsoft  initiated another round of job cuts on Tuesday, trimming close to 6,000 roles—less than 3 per cent of its global workforce—in a fresh move to manage expenses as it pours billions into artificial intelligence. These layoffs span departments and geographies, marking the company’s most significant workforce reduction since it cut 10,000 jobs last year.

This decision, according to a CNBC report, is not connected to the smaller batch of performance-related layoffs that took place in January. Rather, it reflects the company’s ongoing strategy to balance operational costs with its aggressive push into emerging technologies. “We continue to implement organisational changes necessary to best position the company for success in a dynamic marketplace,” a Microsoft spokesperson said via email, reported Reuters.

The company had approximately 228,000 employees as of June 2024 and routinely adjusts its workforce to align with strategic priorities. This latest restructuring comes shortly after Microsoft delivered strong financial results, particularly in its cloud computing segment, Azure, easing concerns about broader economic uncertainties.

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AI Ambitions Tighten Margins

Despite impressive revenue performance, Microsoft is facing mounting pressure on profit margins, largely due to the high costs associated with building out its AI infrastructure. Microsoft Cloud’s gross margins dropped to 69 per cent in the March quarter, down from 72 per cent a year earlier, highlighting the financial strain of scaling AI capabilities.

To address rising demands on its infrastructure, the company has committed $80 billion in capital spending this fiscal year, most of it allocated to data centre expansion. These facilities are essential to resolving capacity issues tied to AI workloads.

Industry-wide, major tech firms are taking similar approaches. Google, for instance, has also laid off hundreds of workers in the past year while prioritising AI growth and trimming costs in other areas, according to various media reports.

Analysts see Microsoft’s cost discipline as a calculated response to the capital intensity of its 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,” said Gil Luria, analyst at D.A. Davidson. He added that the layoffs are evidence that Microsoft is "very closely" managing the margin pressure created by its AI strategy.

While these job cuts signal a renewed focus on efficiency, they also underscore the high-stakes balancing act Big Tech firms are navigating—investing heavily in future technologies while keeping current operations financially sustainable.

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