Microsoft to Lay Off 7,000 Employees Amid Soaring AI Investments
Microsoft is laying off around 3% of its global workforce, impacting approximately 7,000 employees, according to a report from CNBC. The tech giant is restructuring to manage rising costs while continuing to pour billions into artificial intelligence (AI) infrastructure.
This marks Microsoft’s largest round of job cuts since it slashed 10,000 roles in 2023. The layoffs will span across multiple levels and locations, signaling a broad organizational reshuffle.
AI Investments Fuel Strategic Cost-Cutting
While Microsoft continues to report strong financial results, the cost of scaling AI infrastructure is pressuring margins. In the March quarter, Microsoft Cloud’s gross margin dipped to 69%, down from 72% a year ago. The company’s overall gross margin also dropped slightly, from 70% to 69%.
The company plans to spend $80 billion this fiscal year, most of it going toward data center expansion to support growing demand for AI services. Analysts believe the layoffs are part of a deliberate effort to balance spending with profit margins.
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Gil Luria, an analyst at D.A. Davidson, noted that Microsoft may need to reduce headcount annually to offset higher depreciation costs linked to capital investments. “Every year Microsoft invests at the current levels, it would need to reduce headcount by at least 10,000,” Luria said.
Balancing Growth with Financial Discipline
Despite the layoffs, Microsoft remains on solid financial ground. Its Azure cloud business posted better-than-expected growth last quarter, boosting investor confidence. However, the company is still tightening operations.
The current round of layoffs is not tied to performance issues, unlike a smaller round in January. Instead, this move targets streamlining management layers and improving operational efficiency.
Microsoft had 228,000 employees globally as of June last year, including 126,000 based in the United States, according to its latest annual filing.
Big Tech’s New AI-Driven Priorities
Microsoft’s restructuring echoes a broader trend in Big Tech. Companies like Google have also cut jobs while increasing their AI investments. As the industry shifts focus to machine learning and large language models, firms are finding ways to fund innovation without losing financial stability.
The layoffs highlight the balancing act tech giants must perform—investing in the future while managing today’s costs.
