Redmond, Washington – Microsoft is cutting a small percentage of jobs across its departments, targeting employees based on performance, the company confirmed on Wednesday.
“At Microsoft, we focus on high-performance talent,” a company spokesperson said in an email to CNBC. “We are always working on helping people learn and grow. When people are not performing, we take the appropriate action.”
The latest round of layoffs, first reported by Business Insider, is expected to affect less than 1% of Microsoft’s workforce. As of June 2024, the company employed approximately 228,000 people globally.
Navigating Shifts in Workforce
While the cuts represent a minor adjustment compared to larger layoffs in the past, they reflect Microsoft’s ongoing efforts to optimise its workforce. This follows a series of substantial layoffs in recent years:
- January 2023: The company eliminated 10,000 jobs, citing a need to streamline operations.
- January 2024: After finalising the $75.4 billion acquisition of Activision Blizzard, Microsoft’s gaming unit reduced its workforce by 1,900 employees to address redundancies.
The latest move underscores Microsoft’s focus on maintaining a lean, high-performing workforce as it navigates evolving market conditions and its relationship with emerging technologies.
Financial Performance and Market Challenges
Microsoft remains one of the most profitable technology companies, with a net income margin of nearly 38%, among its highest in two decades. Despite this, its stock underperformed broader tech peers in 2024, rising 12% compared to the Nasdaq’s 29% gain.
The company continues to prioritise growth areas such as its Azure cloud platform. Chief Financial Officer Amy Hood stated in October that Azure revenue growth is expected to accelerate in early 2025 due to increased AI infrastructure capacity.
Tensions in AI Partnerships
The layoffs come at a time when Microsoft faces a complex relationship with OpenAI, the artificial intelligence startup it has invested in with over $13 billion. OpenAI has been pivotal in enhancing Microsoft’s AI-driven services, including its Microsoft 365 Copilot assistant.
However, the partnership has also created friction. Over the summer, Microsoft listed OpenAI as a competitor, and CEO Satya Nadella recently described the relationship as one of “cooperation tension.” Analysts have noted that adoption of Copilot technology has been slower than anticipated, raising questions about its long-term impact on the company’s growth strategy.
Outlook for 2025
As Microsoft begins 2025, it continues to tout opportunities in artificial intelligence and cloud computing. While the job cuts are modest, they reflect the company’s commitment to maintaining efficiency and competitiveness in an evolving tech landscape.
The company is set to report its fiscal second-quarter earnings later this month, which will shed further light on its financial health and strategic direction for the year ahead.