Microsoft confirms 10,000 job cuts to ‘align cost with revenue’

19 Jan 2023

Satya Nadella. Image: Heisenberg Media/Flickr (CC BY 2.0)

CEO Satya Nadella told employees that while Microsoft is eliminating some roles by the end of the third quarter, it will continue to hire in other key strategic areas.

Microsoft has confirmed it will lay off 10,000 global employees by the end of the third quarter this year.

CEO and chair Satya Nadella told Microsoft employees yesterday (18 January) that the job cuts are a result of the software giant’s need to “align our cost structure with our revenue and where we see customer demand”.

This confirmation comes just a day after several outlets reported that Microsoft was planning to lay off thousands of employees in response to ongoing economic headwinds and uncertainty.

Earlier this month, major tech companies including AmazonSalesforce and Citrix announced significant job cuts.

Nadella told employees that although customers increased their digital spend during the pandemic, “we’re now seeing them optimise their digital spend to do more with less” at a time when “some parts of the world are in a recession and other parts are anticipating one”.

“At the same time, 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,” said Nadella.

However, he noted that while Microsoft was eliminating roles in some areas – representing less than 5pc of the total company headcount – it will continue to hire in other “key strategic areas”.

Nadella also said that the company will be taking a $1.2bn charge in the second quarter related to severance costs, changes to the company’s hardware portfolio and the cost of lease consolidation “as we create higher density across our workspaces”.

Outgoing US-based employees laid off in the latest round are set to receive a variety of benefits, including above-market severance pay, healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days’ notice prior to termination.

“Benefits for employees outside the US will align with the employment laws in each country,” Nadella added.

Microsoft employs around 220,000 people globally with more than 3,500 in Ireland – excluding those who work for LinkedIn, which was acquired by Microsoft in 2016 for $26bn.

The latest cuts mark Microsoft’s second such announcement in less than six months. The company announced in October last year that it was cutting around 1,000 jobs because of “unfavourable foreign exchange rate movement” and extended production shutdowns in China.

That announcement came less than three months after Microsoft reported its slowest quarterly revenue growth since 2020.

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Satya Nadella. Image: Heisenberg Media/Flickr (CC BY 2.0)

Vish Gain is a journalist with Silicon Republic