By Efthymis Oraiopoulos
Microsoft will cut 10,000 jobs in response to decreasing demand after the pandemic, its CEO said in a note to employees Wednesday.
The announcement comes after tens of thousands of job cuts across the technology sector. The layoffs are a response to decreased spending in cloud computing after the COVID-19 pandemic, Microsoft said: “First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.”
The same holds true for organizations that are fearing or impacted by recession, according to the note. Palantir Technologies Inc., a software company, said this week that reducing cloud spending was a top-ten priority of its customers.
The 10,000 jobs cut amounts to around 5 percent of Microsoft’s total workforce. The company is cutting far fewer jobs than it had added during the COVID-19 pandemic; it expanded by about 36 percent in the two fiscal years following the start of the pandemic, growing from 163,000 workers at the end of June 2020 to 221,000 in June 2022.
The tech giant will also hire in some areas and focus on artificial intelligence (AI) for its future development plans.
“The next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform,” it said.
The company will spend $1.2 billion for employee severance costs and changing its hardware portfolio.
Wedbush Securities analyst Dan Ives said, “This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud.”
Other Tech Layoffs
Other tech companies have also been trimming jobs amid concerns about an economic slowdown.
Amazon and business software maker Salesforce earlier this month announced major job cuts as they prune payrolls that rapidly expanded during the pandemic lockdown.
Amazon said that it will be cutting about 18,000 positions. It’s the largest set of layoffs in the Seattle company’s history, although just a fraction of its 1.5 million global workforce.
Facebook parent Meta is laying off 11,000 people, about 13 percent of its workforce. And Elon Musk, the new owner of Twitter, has slashed the company’s workforce.
Microsoft said in July last year that a small number of roles had been eliminated, while news site Axios in October reported that the company had laid off under 1,000 employees across several divisions.
The company is also grappling with a slump in the personal computer market after a pandemic boom fizzled out, leaving little demand for its Windows and accompanying software.
The Associated Press and Reuters contributed to this report.