Microsoft is cutting 10,000 workers, roughly 5% of its workforce, to join other technology companies that have scaled back their pandemic-era expansions.
The company said in a regulatory filing on Wednesday that the layoffs were in response to “macroeconomic conditions and changing customer priorities.”
The Redmond, Washington-based software giant said it would also make changes to its hardware portfolio and consolidate the locations of its rented offices.
Microsoft is cutting far fewer jobs than it added during the COVID-19 pandemic as it responds to a surge in demand for workplace software and cloud computing services with many people working and studying from home.
“A big part of this is just overstaffing,” said Joshua White, a professor of finance at Vanderbilt University.
Microsoft’s workforce expanded about 36% in the two fiscal years following the onset of the pandemic, growing from 163,000 workers at the end of June 2020 to 221,000 in June 2022.
The layoffs represent “less than 5 percent of our total employee base, with some notice happening today,” CEO Satya Nadella said in an email to employees.
“While we are eliminating roles in some areas, we will continue to hire in key strategic areas,” Nadella said. He stressed the importance of building a “new computing platform” using advances in artificial intelligence.
He said customers who were accelerating their digital spending during the pandemic are now trying to “optimize their digital spending to do more with less”.
“We’re also seeing institutions in every industry and geography being cautious because some parts of the world are in a recession and other parts are anticipating it,” Nadella wrote.
Other tech companies are also cutting jobs amid fears of an economic slowdown.
Amazon and business software maker Salesforce earlier this month announced massive job cuts as they cut back on a payroll that has expanded rapidly during the pandemic shutdown.
Amazon said it will cut about 18,000 jobs. It’s the largest batch of layoffs in Seattle’s corporate history, despite only being a fraction of its global workforce of 1.5 million.
Facebook’s parent company Meta is laying off 11,000 people, about 13% of its workforce. And Elon Musk, Twitter’s new CEO, has cut the company’s workforce.
Nadella did not directly mention the layoffs on Wednesday when he appeared at the annual meeting of the World Economic Forum being held this week in Davos, Switzerland.
When asked by forum founder Klaus Schwab what tech layoffs mean for the industry’s business model, Nadella said companies that thrived during the COVID-19 pandemic are now seeing that demand “normalize.”
“Honestly, we in the technology industry also have to be efficient, right?” Nadella said. “It’s not about anyone else doing more with less. We’re going to have to do more with less. So we’re going to have to show our own productivity gains with our technology.”
Microsoft did not immediately respond to questions about where layoffs and office closures would be concentrated. As of June, it had 122,000 workers in the United States and 99,000 elsewhere.
All industries are looking to cut costs ahead of a potential recession, said White, the Vanderbilt professor, but technology companies may be particularly sensitive to rapidly rising interest rates, a tool the Fed has used aggressively in recent months. fight inflation.
“This is hitting tech companies a little bit harder than it is hitting industries or consumer staples because so much of Microsoft’s value is in cash-flow projects that won’t come to fruition for several years,” he said.
Among the projects that have attracted attention recently is Microsoft’s investment in its partner in San Francisco startup OpenAI, maker of the writing tool ChatGPT and other AI systems that can generate computer-readable text, images and code.
Microsoft, which owns the Xbox gaming business, is facing regulatory uncertainty in the US and Europe, delaying its planned acquisition of Activision Blizzard’s $68.7 billion video game company, which had about 9,800 employees as of last year.
AP Business Writer Kelvin Chan contributed to this story from London.
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