Microsoft is preparing to announce job cuts next week that will impact thousands of employees across its sales, consulting, and Xbox divisions. According to people familiar with the situation, the layoffs will affect less than 2.5% of the company’s 220,000-person workforce as the tech giant seeks to control costs while increasing spending on artificial intelligence.
Why is Microsoft reducing its workforce now?
The planned reductions are part of a strategic move to reallocate capital toward artificial intelligence development. Microsoft is facing pressure from Wall Street regarding the potential for AI to replace existing software services, including some of its own core offerings. This investor concern has contributed to a roughly 17% slump in the company’s stock over the past month.
To manage these transitions, Microsoft has previously used voluntary programs to reduce headcount. Earlier this year, the company offered a voluntary retirement program to US-based employees at level 67 and below who met specific age and service requirements. An internal document viewed by Business Insider showed that sales employees receiving commission-based compensation were excluded from that specific buyout offer.
About one-third of the 9,000 US employees eligible for Microsoft’s recent voluntary retirement program chose to take the buyout, which helped the company maintain a lower total layoff percentage compared to the previous year.
How do these cuts compare to previous Microsoft layoffs?
The current plan to cut less than 2.5% of the workforce contrasts with the scale of layoffs seen last year.
| Period | Approximate Roles Cut | Percentage of Workforce |
|---|---|---|
| May (Last Year) | 6,000 | Not specified |
| July (Last Year) | 9,000 | ~4% |
| Upcoming Round | Thousands | < 2.5% |
According to the people familiar with the matter, some affected employees will be offered new roles within the company immediately following the announcement.
What is happening within the Xbox gaming division?
The Xbox division is among the departments targeted in the upcoming cuts. Reductions in the gaming sector have been anticipated following a memo from Asha Sharma, which called for a “reset” of the business unit.
Frequently Asked Questions
When will Microsoft announce the layoffs?
The company is planning to announce the layoffs next week, though the exact timing may change, according to people familiar with the situation.
Which departments are being affected?
The cuts are expected to impact roles in sales, consulting, and the Xbox gaming division.
Why is Microsoft cutting jobs if they are profitable?
The cuts are intended to control costs and allow the company to increase spending on artificial intelligence to meet Wall Street expectations and technological shifts.
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