Microsoft Will Lay off 10,000 Workers, Adding to IT's Excess of Layoffs

Microsoft Corp (NASDAQ:MSFT) stated on Wednesday that it will remove 10,000 employees and take a $1.2 billion loss against profits as cloud-computing clients rethink spending and the business prepares for a potential recession.

The layoffs are in addition to the tens of thousands that have been reported over the past few months in the IT industry, which has retreated after a period of tremendous expansion during the epidemic.

The announcement comes as the software company plans to raise expenditure on generative artificial intelligence, the emerging bright spot in the industry.

CEO Satya Nadella sought to address the varied outlooks for several business divisions in an internal message to staff.

Customers wished to "optimize their digital expenditures to do more with less" and "exercise prudence since certain sections of the world are experiencing a recession and others are expecting one," he stated. Simultaneously, AI advancements are spawning the next major wave of computing.

The layoffs, which will affect fewer than 5 percent of Microsoft's staff, will be completed by the end of March, with notification commencing on Wednesday.

Microsoft would continue to employ in "key areas," he said. AI is likely one of these disciplines. This week, Nadella introduced AI to a gathering of world leaders in Davos, Switzerland, stating that the technology will alter Microsoft's products and have a global influence.

Microsoft has contemplated raising its $1 billion bet in OpenAI, the firm behind the ChatGPT craze in Silicon Valley, which Microsoft will shortly offer as a cloud service.

The closing price for shares of the Redmond, Washington-based corporation decreased by 2% on Wednesday.

Amazon.com Inc. (NASDAQ:AMZN), a rival in the retail and cloud-computing industries, began notifying its own 18,000 employees of layoffs on Wednesday.

Amazon indicated in an internal message that impacted employees in the United States, Canada, and Costa Rica will be informed by day's end. The Chinese staff will be notified following the Chinese New Year.

Meta Platforms Inc (NASDAQ:META), the parent company of Facebook, has announced the termination of 11,000 employees, while Salesforce (NYSE:CRM) Inc has announced the removal of 10% of its 80,000-person staff.

More than 97,000 job cutbacks were reported in the IT business in 2022, the highest since 131,000 layoffs were revealed in 2002, according to the outplacement agency Challenger, Gray & Christmas.

"We haven't seen this amount of activity since the dot-com disaster," said Andrew Challenger, the company's senior vice president.

According to an update on the Worker Adjustment and Retraining Notification (WARN) page for Washington State, Microsoft will lay off 878 full-time employees at its Redmond headquarters. The legislation requires the majority of U.S. firms to report mass layoffs impacting 50 or more employees at a single site.

CLOUD GROWTH DECLINING

According to some experts, Microsoft's billion-dollar penalty would cut the company's second fiscal quarter profit by 12 cents per share and may have consequences outside the technology sector.

Brian Frank, a portfolio manager at Frank Funds who has owned Microsoft shares periodically over the past many years, stated, "This is one of the marquee growth firms with a very distinct user base indicating that economic conditions may not be as favorable as we anticipated."

According to Nadella, the charge is the result of severance fees, as well as changes to Microsoft's hardware lineup and lease consolidation to create more dense workplaces.

Microsoft declined to comment on the hardware modifications or whether any product lines will be discontinued.

In recent years, Microsoft's cloud sales have surged due to an increase in corporate demand for online data hosting and cloud computing. However, growth dropped to 35% in the first quarter of fiscal year 2023, and the business forecasts further slowing. It was reported in July of last year that a few posts had been cut.