Windows maker Microsoft is laying off around 6,000 employees from its global workforce in what it calls an "organizational change" to better position the company in a "dynamic marketplace." The widespread job cuts come after the tech giant announced another round of spending on artificial intelligence (AI) following its March quarter results.
This is the second round of layoffs Microsoft employees have faced this year. The earlier job cuts were linked to performance-related issues, but the latest round is not related to that, a Microsoft spokesperson told CNBC on Tuesday.
"We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace," the company said.
As of June last year, Microsoft had 228,000 full-time employees. In a similar move in 2023, the company laid off 10,000 workers across various geographies and levels.
Layoffs Follow Cloud Margin Squeeze
The layoffs follow strong quarterly results and robust growth in Microsoft's Azure cloud-computing business. While revenue rose 13% year-on-year and net income increased 18% to $25.8 billion in the March quarter, profitability was under pressure due to rising costs tied to scaling its AI infrastructure.
Microsoft Cloud’s gross margin narrowed to 69%, down from 72% a year earlier.
CEO Satya Nadella has outlined plans to invest $80 billion in fiscal 2025 to expand AI-ready data centres—an effort that involves substantial overseas imports, which could become costlier depending on future tariffs.
D.A. Davidson analyst Gil Luria told Reuters that the layoffs reflect Microsoft’s strategy to manage margin pressure from its aggressive AI investments.
“At current investment levels, Microsoft may need to reduce headcount by at least 10,000 annually to offset increased depreciation from capital spending,” he said.
During the April earnings call, Chief Financial Officer Amy Hood said Microsoft was focused on “building high-performing teams and increasing our agility by reducing layers with fewer managers.” She noted that the company’s headcount in March was 2% higher than the previous year but had dipped slightly since the end of 2023.
US Employees Hardest Hit
Microsoft’s home state of Washington was among the hardest hit by the latest round of layoffs. The company notified state officials that 1,985 jobs tied to its Redmond headquarters would be cut, affecting many in software engineering and product management roles, reported the Associated Press (AP).
The layoffs span across Microsoft’s operations, impacting divisions such as Xbox and LinkedIn. Some affected employees and executives shared their experiences on LinkedIn.
“This is the first time I’ve had to lay people off to support business goals that aren’t my own,” wrote Scott Hanselman, a vice president in Microsoft’s developer community. “I often struggle to reconcile my personal values with the system I’m part of. These are people with dreams, with rent to pay — I care about them deeply.”
He added, “This is a day with a lot of tears.”
