Microsoft is cutting 10,000 jobs, citing a post-pandemic change in digital spending habits and weakness in the global economy.
The tech group joined a list of US peers that have made big job cuts, including Facebook owner Meta, Amazon and business software maker Salesforce, which have scaled back workforce expansions spurred by a pandemic-related boom in demand for its services and products that have lost momentum.
Microsoft CEO Satya Nadella said in a blog post that customers had increased their digital spend when the coronavirus hit in 2020-21, but were now cutting back.
“Now we see them optimize their digital spend to do more with less,” he said.
Nadella added that organizations in all industries and regions of the world were showing caution “as some parts of the world are in a recession and other parts anticipate one.”
Nadella also pointed to artificial intelligence creating the “next major wave of computing” as an example of the “significant change” facing the business. Microsoft is an investor in OpenAI, the company behind the ChatGPT chatbot.
“We will align our cost structure with our revenue and where we see customer demand. Today, we are making changes that will result in reducing our overall workforce by 10,000 jobs.”
Microsoft employs some 220,000 people worldwide, and the cuts represent less than 5% of its total workforce.
The layoffs, due to take place at the end of March, will result in a charge of $1.2 billion (£1 billion) in the second quarter of its fiscal year, Microsoft said.
It follows some reductions last year. Microsoft said last July that a small number of features had been removed, and in October news site Axios reported that the company had laid off fewer than 1,000 employees across various divisions.
Microsoft is dealing with a slump in the personal computer market after the pandemic boom faded, leaving less demand for its Windows and accompanying software. The slowdown in demand has also affected Microsoft’s cloud computing unit, which is now the largest past in its business.
The company also owns the Xbox gaming platform and is seeking to buy video game maker Activision Blizzard, whose titles include Call of Duty and World of Warcraft, in a $68.7 billion deal. However, the US Federal Trade Commission has moved to block the transaction on antitrust grounds.
One analyst said Microsoft and other US tech companies were battling a “near-term category five economic storm.”
Dan Ives, an analyst at US financial services firm Wedbush Securities, said: “We are seeing the clock strike midnight for the tech sector after a decade of hypergrowth and now you are seeing major layoffs in [Microsoft]Salesforce, Meta, Amazon, among many others around [Silicon] Valley. This is a scam moment to preserve margins and reduce costs.”
Overzealous hiring during the pandemic has become a feature of many tech companies’ job-cutting announcements in recent months. Amazon’s workforce had doubled to 1.5 million since March 2020, and the company this month said it would cut 18,000 of those positions.
The online retailer’s chief executive, Andrew Jassy, referred to “the uncertain economy” in announcing the cuts, but added that Amazon had “hired quickly in recent years.”
Amazon began implementing the massive job cuts on Wednesday, according to Bloomberg, with workers in the US, Canada, and Costa Rica contacted by email. Bloomberg added that affected workers in China would be contacted after the Lunar New Year, while in other regions the company will need to consult with employee representatives before initiating layoffs.
Mark Zuckerberg, chief executive of Meta, the parent company of Facebook and Instagram, announced 11,000 layoffs in November after admitting that the surge in online activity during the pandemic “didn’t turn out as expected”.
Salesforce CEO Marc Benioff said this month when announcing some 8,000 job cuts that “we hired too many people which led to this economic downturn that we’re now facing.”
Joshua White, an assistant professor of finance at Vanderbilt University, said the company’s filings showed the company had increased its workforce by about 50% from pre-pandemic levels.
“Such rapid expansion was based on competition to attract value-driving technology talent at companies like Microsoft, [Google owner] Alphabet and Meta”, he said.
“All of these tech companies rapidly expanded their workforces over the past two years in anticipation of continued pandemic-period growth, which was partially fueled by government stimulus.”
