On Tuesday, Microsoft announced plans to lay off nearly three percent of its workforce, impacting approximately 6,000 employees. This decision is part of the company’s strategy to manage expenses while investing significantly in its artificial intelligence initiatives.
The layoffs will affect employees across various levels and regions, marking the largest reduction since the company let go of 10,000 workers in early 2023. Microsoft had previously dismissed a small number of employees in January due to performance issues, but reports indicate that the newest round of cuts is not connected to those layoffs, as first reported by CNBC.
Leading tech companies have been pouring resources into AI, viewing it as a pivotal growth opportunity while simultaneously cutting costs in other areas to maintain profit margins. Google, among others, has also reduced its workforce by hundreds of employees in an effort to manage expenses while prioritizing AI development, according to media reports.
A spokesperson for Microsoft stated, “We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace.”
With a workforce of approximately 228,000 as of June last year, Microsoft frequently utilizes layoffs to align its staffing with key business priorities.
This announcement follows a period in which Microsoft reported stronger-than-expected growth in its Azure cloud-computing segment, alongside impressive results for the latest quarter, alleviating concerns among investors amid a fluctuating economic environment.
However, the financial impact of ramping up AI infrastructure has contributed to a decline in profitability, with Microsoft’s cloud margins decreasing to 69 percent in the March quarter, down from 72 percent the previous year.
The company has allocated $80 billion (approximately Rs. 6,83,255 crore) for capital expenditures this fiscal year, primarily aimed at expanding data centers to address capacity constraints for its AI services.
D.A. Davidson analyst Gil Luria commented that the layoffs reflect Microsoft’s close management of the margin pressures associated with its increased investments in AI. He further noted, “We believe that for every year Microsoft invests at current levels, it would need to reduce headcount by at least 10,000 to offset the higher depreciation resulting from their capital expenditures.”
© Thomson Reuters 2025
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