- By Prateek Levi
- Wed, 14 May 2025 01:41 PM (IST)
- Source:JND
Microsoft is back in the layoff spotlight. The tech giant is planning t letting go of about 3% of its global workforce—over 6,000 employees—as part of its largest round of job cuts since early 2023, when it axed 10,000 roles in one of its most dramatic restructures to date.
The move may seem surprising given Microsoft’s recent momentum in AI and cloud computing, but the company says it’s all part of adapting to a rapidly changing tech landscape. In a statement to The Verge, Microsoft described the layoffs as “organisational changes necessary to best position the company for success in a dynamic marketplace.”
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Here’s a quick breakdown of what’s happening at Microsoft and why.
1. Laying Off While Doubling Down on AI
Microsoft is investing aggressively in artificial intelligence, with billions flowing into new data centres and infrastructure to support its AI products. Reports suggest its capital spending for this year could hit a staggering $80 billion, most of it focused on scaling up AI capabilities. That level of investment doesn’t come cheap, and the company appears to be trimming its workforce to balance the books.
These layoffs fall under what’s often called “strategic realignment”—a reshaping of the company to better meet future goals.
3. This Isn’t Just About Performance
It’s worth noting that Microsoft had already initiated performance-related cuts earlier this year. But this round is different. These job losses aren’t tied to performance; they’re part of a broader shift toward making the company leaner and more focused on its highest-priority areas—namely, AI and cloud.
2. Cutting Management Layers
Beyond budget balancing, Microsoft is also simplifying how it operates internally. CFO Amy Hood recently hinted at a broader effort to streamline the company’s corporate structure. On a recent earnings call, she pointed to reducing management layers, saying the company wants “more direct and nimble decision-making.”
While Microsoft hasn’t specified which departments are affected, reports suggest the layoffs span various teams, including its international offices and even LinkedIn.
4. Microsoft’s Evolving Identity
Microsoft may still be known best for Windows and Office, but its business has shifted dramatically over the last few years. Today, it’s a cloud-first company betting big on AI. Azure, its cloud platform, continues to post strong growth—but even here, rising costs are squeezing profit margins. In its latest earnings report, Microsoft Cloud’s profit margins dipped from 72% to 69% year over year.
It’s a sign that even successful divisions aren’t immune to cost pressures—and that AI expansion has a real financial impact. As Gil Luria, technology analyst at D.A. Davidson, told Reuters: “We believe that every year Microsoft invests at the current levels, it would need to reduce headcount by at least 10,000 in order to make up for the higher depreciation levels due to their capital expenditures.”
5. A Broader Trend in Tech
Microsoft isn’t the only one making tough calls. Across Silicon Valley, big names like Google, Meta, and Amazon have all trimmed thousands of jobs—even as they pour resources into generative AI, cloud services, and high-performance computing infrastructure.
So while Microsoft’s latest layoffs are significant, they’re also part of a larger shift across the tech industry—one where companies are betting their futures on AI and restructuring everything else to make room for it.