On Tuesday, Microsoft announced it will be laying off approximately 6,000 employees, representing less than three percent of its total workforce. This decision comes as the technology leader seeks to control costs while investing billions in its ambitious artificial intelligence initiatives.
The layoffs will affect employees across various levels and locations, marking one of the largest workforce reductions since Microsoft eliminated 10,000 positions earlier in 2023. Although the company made minor cuts in January citing performance issues, these new layoffs are not related, according to a report from CNBC, which first broke the news.
In a trend observed across the tech industry, major companies are significantly investing in AI, viewing it as a crucial driver of future growth while also implementing cost-cutting measures elsewhere. Reports suggest that Google has similarly let go of hundreds of employees over the past year in an effort to manage expenses and prioritize AI development.
A Microsoft spokesperson stated in an email, “We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace.”
As of June 2022, Microsoft employed 228,000 workers and has a history of using layoffs strategically to focus its workforce in key areas.
This announcement follows a period of stronger-than-expected growth in Microsoft’s cloud computing segment, Azure, as well as impressive financial results in the latest quarter, alleviating some concerns among investors amid a fluctuating economy.
However, the expenses tied to scaling its AI capabilities have impacted profit margins, with Microsoft Cloud margins decreasing to 69 percent in the March quarter, down from 72 percent the previous year.
The company has allocated $80 billion in capital expenditures for this fiscal year, primarily to enhance data center capacity to meet the demands of its AI services.
D.A. Davidson analyst Gil Luria noted that these layoffs indicate Microsoft is closely managing the financial pressures brought on by its increased investments in AI. Luria suggested that to offset higher depreciation costs from capital expenditures, Microsoft may need to reduce its workforce by around 10,000 annually, given its current investment trajectory.
© Thomson Reuters 2025
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