Microsoft to Lay Off 3% of Workforce Amid AI Investment Push

Microsoft has announced plans to lay off approximately 6,000 employees, representing about 3% of its global workforce, as part of a strategic shift to streamline operations and bolster its investments in artificial intelligence (AI).

The layoffs will affect employees across various levels, teams, and geographic locations, including subsidiaries like LinkedIn. This move marks Microsoft’s largest round of job cuts since 2023, when the company eliminated 10,000 positions.

Microsoft’s decision comes in the wake of its commitment to invest $80 billion in AI infrastructure during the fiscal year 2025. The company aims to expand its data centers to alleviate capacity bottlenecks for AI services.

Despite reporting strong quarterly revenue of $70.07 billion, surpassing Wall Street expectations, Microsoft is focusing on restructuring to sustain significant capital investments in AI. The company’s cloud division, Azure, has shown notable growth, contributing to the positive earnings.

In addition to the layoffs, Microsoft is implementing a rehire ban and plans to overhaul its performance management processes. These measures reflect ongoing structural adjustments amid changing business priorities in the technology industry.

Analysts suggest that the workforce reductions are necessary to offset the high costs associated with AI infrastructure and depreciation. Gil Luria from D.A. Davidson noted that every year Microsoft invests at the current levels, it would need to reduce headcount by at least 10,000 to make up for the higher depreciation levels due to their capital expenditures.

This move aligns with a broader trend in the tech industry, where companies like Google, Amazon, and Meta have also implemented sizable job cuts recently, citing similar restructuring strategies to prioritize AI and control costs.

As Microsoft continues to pivot towards AI, the company emphasizes its commitment to building high-performing teams and increasing agility by reducing management layers. CFO Amy Hood highlighted the importance of streamlining operations to position the company for success in a dynamic marketplace.

The layoffs, while significant, are part of Microsoft’s broader strategy to adapt to the evolving technological landscape and maintain its competitive edge in the rapidly growing AI sector.