Microsoft Corp. confirmed plans to lay off about 10,000 workers Wednesday amid a continued wave of job cuts in the technology sector.
Chief Executive Satya Nadella shared news of the planned layoffs with employees in a note that was also posted to the company’s corporate blog. He said that the layoffs, which are expected to affect less than 5% of Microsoft’s MSFT,
total employee base, come as the company looks to “align [its] cost structure” with its revenue and with areas where the company is seeing customer demand.
“First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” Nadella said in the note to employees. “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.”
The layoffs were largely anticipated, with reports from Sky News and Bloomberg News on Tuesday indicating that Microsoft was preparing to make cuts.
Microsoft joins other technology companies big and small that have made recent moves to trim staff in the wake of pandemic-fueled hiring sprees and subsequent concerns about whether inflated employee counts align with the current economic reality.
Nadella noted in his communications that Microsoft is “eliminating roles in some areas” but will “continue to hire in key strategic areas.” The company disclosed in a filing with the Securities and Exchange Commission that it was also making changes to its hardware portfolio and consolidating leases “to create higher density across our workspaces.”
Microsoft expects to take a $1.2 billion charge related to these actions in its fiscal second quarter and anticipates that the charge will result in a 12-cent negative impact to earnings per share.
Meta Platforms Inc. META,
Amazon.com Inc. AMZN,
and Intel Corp. INTC,
are among the large technology players that have announced layoffs in recent months. Others include Shopify Inc. shop,
Peloton Interactive Inc. PTON,
and Coinbase Global Inc. coins,
Here are the companies in the layoffs spotlight: Coinbase joins Cisco, Amazon, Salesforce, Intel, Google, HP
Data from Layoffs.fyi, a site that tracks cuts across the tech sector, said that more than 25,000 workers in the industry have been laid off so far in 2023.
Ahead of Microsoft’s expected job-cut announcement, MoffettNathanson analyst Sterling Auty wrote that investors should focus on the company’s recent artificial-intelligence developments instead. Microsoft has invested in OpenAI, the company behind the chatGPT bot, and announced earlier this week that it was making its Azure OpenAI service generally available.
Auty wrote that “going through the growth dynamics of the last five years, we believe many companies are not being run at peak efficiency so there are areas where cuts might make sense.”
But at the same time, he continued, “incorporating one of the leading AI technologies into an expanding part of the product portfolio could boost top-line growth in key areas ranging from cloud to search/advertising to even security, which could pay dividends for many years to come.”
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