Microsoft Cuts 9,000 Jobs, 4% of Workforce, Amid AI Push

Microsoft has announced its second round of significant layoffs this year, affecting approximately 9,000 employees, which constitutes 4% of its total workforce. This move comes after the company had already reduced its global staff by more than 7% since the beginning of the year. While the layoffs have not been explicitly linked to artificial intelligence (AI), the company's CEO previously disclosed that one-third of Microsoft's code is now written by software. This revelation underscores the growing influence of AI in the tech industry and its potential to automate certain job functions.

Microsoft's latest round of layoffs will impact various departments within the company. This announcement follows previous layoffs in May, when about 6,000 positions were cut, and in January, when 2,000 positions were eliminated, both cited as performance-related. In addition to these large-scale reductions, Microsoft has been conducting smaller layoffs throughout the year. Regulatory documents from Washington State indicate that 40% of the approximately 2,000 positions cut in May were software engineers. Microsoft had also laid off 10,000 employees in 2023 in response to slowing revenue growth. As of the end of June 2024, Microsoft has a total of 228,000 employees.

The pressure to invest in AI is driving cost-control measures at Microsoft. Although the company has not explicitly attributed the latest layoffs to AI, CEO Satya Nadella previously stated that up to one-third of the company's code is now written by software. Microsoft has committed to investing 80 billion dollars in data center infrastructure over the fiscal year ending June 30. The company stated that it continues to implement necessary organizational changes to position itself and its teams for success in a dynamic market. Chief Financial Officer Amy Hood told investors in April that Microsoft is focused on building high-performance teams by increasing agility through a reduction in management layers.

The trend of AI-driven layoffs is not limited to Microsoft. Amazon's CEO warned white-collar employees last month in a memo that their jobs are threatened by AI. He stated that fewer people will be needed to do some of the work that is being done today, and this is expected to reduce the overall corporate employee count. In 2023, Amazon cut 27,000 positions in two rounds of layoffs, while its cloud computing division, Amazon Web Services, also eliminated hundreds of positions in 2024. Despite facing layoffs pressure, Microsoft reported better-than-expected results for the three months ending in March, with robust growth in its cloud computing sector, and its stock has outperformed competitors this year.

This wave of layoffs highlights the broader trend of "reducing staff and increasing efficiency" sweeping through Silicon Valley. As tech giants invest heavily in AI, they are also looking to streamline their operations and reduce costs. The integration of AI into various aspects of business operations is leading to a significant shift in the workforce, with many traditional roles being automated. This trend is likely to continue as companies seek to leverage AI to enhance productivity and competitiveness. The impact of these changes on the job market and the broader economy remains to be seen, but it is clear that the tech industry is undergoing a profound transformation driven by advancements in AI technology.