Microsoft is shedding 10,000 staff and becoming a member of Amazon and different tech corporations in job cuts
Microsoft plans to lay off 10,000 employees as part of broader cost-cutting measures, the company said in a securities filing on Wednesday, becoming the latest tech company to lay off staff due to mounting economic uncertainty.
Before announcing the layoff at the World Economic Forum (WEF) in Davos, Switzerland on Wednesday, Microsoft CEO Satya Nadella said the company was not immune to a weaker global economy.
“No one can defy gravity, and gravity here is inflation-adjusted economic growth,” he told WEF founder Klaus Schwab in a livestream discussion.
In a memo to employees on Wednesday, Nadella also cited demand for digital services, which had been changing for years after the pandemic began, as well as looming fears of a recession.
“We are experiencing times of significant change, and as I meet with clients and partners, a few things become clear,” he wrote. “As we’ve seen customers accelerate their digital spend during the pandemic, we see them now optimizing their digital spend to do more with less.”
Microsoft had approximately 221,000 full-time employees worldwide as of June 30, 2022, including approximately 122,000 in the United States, according to a filing by the U.S. Securities and Exchange Commission.
Nadella said the job cuts account for less than 5% of the company’s total workforce and the cuts will be completed by the end of the third quarter of this year, which ends in March.
He said the company will incur a $1.2 billion charge in the second quarter related to “severance costs, changes to our hardware portfolio and lease consolidation costs.”
“These decisions are difficult but necessary,” Nadella wrote.
Several tech companies have sharply reduced their workforce since the beginning of the year as inflation weighs on consumer spending and rising interest rates constrain funding. Demand for digital services during the pandemic has also eased as people return to their offline lives.
Amazon (AMZN) said it plans to lay off 18,000 employees and Salesforce said it will cut 10% of its workforce. Facebook (FB) parent Meta also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft had laid off fewer than 1,000 employees in several business units.
Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for hiring too many people early in the pandemic and misjudging how an increase in demand for their products would cool once the restrictions of Covid-19 would be relaxed.
While the overall job market remains tight, layoffs in the tech sector have increased at a staggering rate. A recent report by outplacement firm Challenger, Gray & Christmas found that tech layoffs rose 649% year over year in 2022, while job losses across the economy as a whole increased just 13% over the same period.
Microsoft will report second quarter results on January 24th. The software company’s Azure cloud computing business drove revenue growth in the three months ended September as revenue at its personal computing unit declined slightly.
Even as Microsoft makes significant cuts, Nadella said the company will continue to invest in “strategic areas for our future,” and touted advances in AI as “the next big wave” of computing. His letter to employees comes amid rumors of a significant investment by Microsoft in OpenAI, the company behind AI chatbot ChatGPT.