Microsoft is laying off thousands of employees despite posting record profits and reaching historic highs in its stock price. For many concerned about the future of work amid the rise of artificial intelligence, this sends a stark message: strong performance and profitability no longer guarantee job security.
The software giant, a key player in the generative AI surge, confirmed to Gizmodo on Wednesday that it is conducting another significant round of layoffs. While Microsoft did not specify the exact number, stating only that it represents less than 4% of its workforce, Gizmodo estimates the total job cuts to be around 9,000 based on internal announcements and earlier reductions reported throughout the year.
As of June 2024, Microsoft reported a global workforce of 228,000 employees.
Here’s a breakdown of how the layoffs have unfolded so far: fewer than 1 percent of employees were let go in January due to performance reasons, over 6,000 jobs were cut in May, followed by another 300 in June. With this most recent round, Gizmodo estimates that about 8,777 positions were eliminated in July, representing just under 4 percent of Microsoft’s global workforce.
“We continue to make organizational and workforce adjustments necessary to position the company and its teams for success in a rapidly changing market,” a Microsoft spokesperson said in a statement, offering no further specifics.
The layoffs are affecting various levels, departments, and regions. According to a source familiar with the situation, Microsoft’s gaming division, which includes Xbox, is among those impacted.
Record Profits, Record Layoffs
The timing of these cuts sharply contrasts with the company’s strong financial performance. Microsoft ranks as the world’s second-most valuable company, boasting a market capitalization of $3.65 trillion, second only to Nvidia. It remains financially robust, reporting an 18 percent increase in net income to $25.8 billion in the most recent fiscal quarter, as announced in April. Revenue also grew 13 percent, reaching $70.1 billion.
“Cloud and AI are critical drivers for businesses to boost output, lower costs, and accelerate growth,” said CEO Satya Nadella in April. “From AI infrastructure and platforms to applications, we are innovating across the entire technology stack to deliver value for our customers.” However, this innovation could also be rendering thousands of jobs obsolete.
Although Microsoft hasn’t officially connected the layoffs to its swift adoption of AI, the timing invites speculation. At Meta’s LlamaCon conference in April, Nadella told CEO Mark Zuckerberg that AI tools now write 20 to 30 percent of Microsoft’s code.
Microsoft CTO Kevin Scott has gone further, forecasting that by 2030, AI will generate 95 percent of all the company’s code.
The tech giant has poured billions into generative AI, primarily through its close collaboration with OpenAI. This includes embedding large language models like GPT into Microsoft Office, GitHub, Azure, and Windows products. These AI tools can write, debug, and deploy code, as well as manage administrative tasks, customer support, scheduling, and more. Microsoft is betting that these technologies will transform how work gets done. Yet for many employees, especially in tech roles, AI is already replacing certain tasks and jobs.
Microsoft Isn’t Alone
Across the industry, leaders are increasingly acknowledging that AI is reducing their workforce. Salesforce CEO Marc Benioff recently stated that AI handles “50 percent of the work” at his company, shortly before announcing 1,000 additional layoffs. Klarna CEO Sebastian Siemiatkowski revealed that AI has enabled the fintech company to cut its staff by 40 percent. IBM and Duolingo have also confirmed that they are using AI systems to replace entire teams or functions.