Key Points:
- Nearly 4% of Microsoft’s 228,000 employees will be laid off amid soaring AI infrastructure costs.
- The company pledged $80 billion for fiscal 2025 AI and cloud investments, straining profit margins.
- Layoffs will impact sales, management layers, and parts of its gaming division, including Candy Crush maker King.
AI Ambitions Collide with Cost-Cutting Measures
Microsoft has announced it will lay off nearly 4% of its global workforce as the company moves to control expenses while scaling its ambitious investments in artificial intelligence infrastructure.
The decision, disclosed on Wednesday, comes as the tech giant grapples with the financial weight of its $80 billion capital spending commitment for fiscal year 2025, largely driven by expanding its AI and cloud operations.
As of June 2024, Microsoft employed about 228,000 people worldwide. The current round of layoffs follows job cuts in May that affected approximately 6,000 workers, with Bloomberg previously reporting that thousands of additional jobs, particularly in sales, were at risk.
In a statement, Microsoft emphasized plans to streamline its structure by reducing organizational layers, cutting down on managerial positions, and simplifying its products and procedures to improve efficiency amid these significant investments.
The company is facing shrinking cloud profit margins in the June quarter compared to the previous year, as the financial demands of building out AI capabilities continue to pressure its bottom line.
Gaming Division and Broader Industry Layoffs
The layoffs will also affect Microsoft’s gaming division, including King, the Barcelona-based developer behind Candy Crush, which will reduce its staff by 10%, or about 200 employees, according to Bloomberg. While Microsoft confirmed that its gaming unit is impacted, it clarified that the cuts will not affect the majority of the division.
The Seattle Times first reported the broader layoff plans on Wednesday, as Microsoft joins its Big Tech peers in recalibrating their workforces amid aggressive AI expansions.
Earlier this year, Meta announced a 5% reduction targeting its lowest-performing staff, while Google’s parent company, Alphabet, has also executed layoffs impacting hundreds of employees in the past year.
Microsoft’s push to lead in AI, highlighted by its significant capital outlay and infrastructure expansion, reflects the broader industry race to dominate the fast-growing sector.
However, the financial strain of rapid scaling has led to strategic downsizing, affecting workers across departments as the company seeks to balance growth and profitability.
As AI continues to reshape the technology landscape, Microsoft’s latest move signals the challenges even industry leaders face in navigating the high costs of innovation while maintaining operational efficiency in a competitive market.