Microsoft cuts 9,000 jobs while AI investments fuel $3.7T valuation

Microsoft is laying off approximately 9,000 employees, representing about 4% of its workforce, following a previous round of 6,000 job cuts in May. The reductions signal a tightening job market across major tech companies and suggest that Microsoft’s own AI development may be contributing to workforce displacement, even as the company continues generating multibillion-dollar quarterly profits.

What you should know: The layoffs span multiple geographies and divisions, including sales teams and Microsoft’s video game business.

• Microsoft employed 228,000 people as of June 2024, making this the second major round of cuts in recent months.
• The company’s market valuation has reached nearly $3.7 trillion, driven by investor confidence despite the workforce reductions.
• Cuts were widely expected internally as Microsoft began its new fiscal year on Tuesday.

The AI factor: Microsoft’s artificial intelligence investments appear to be directly impacting employment decisions across the company.

• GitHub Copilot, Microsoft’s AI coding tool, now serves more than 15 million users and has impressed executives with its effectiveness.
• The company is spending billions on data centers and cloud infrastructure to support AI and cloud computing demand.
• Andy Jassy, Amazon’s CEO, recently told employees he expects corporate workforce shrinkage “as we get efficiency gains from using A.I. extensively across the company.”

The big picture: Tech companies are simultaneously cutting rank-and-file workers while competing intensely for top AI talent.

• Meta has been aggressively recruiting AI researchers with job offers reaching $100 million in some cases.
• Microsoft executives have emphasized reducing bureaucracy and increasing manager-to-employee ratios.
• Previous layoffs primarily targeted software engineers and product managers rather than management roles.

What they’re saying: Company leaders framed the cuts as strategic positioning rather than financial necessity.

• “We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace,” Microsoft said in a statement.
• Phil Spencer, head of Microsoft’s gaming division, described the cuts as “the discipline to prioritize the strongest opportunities.”
• CFO Amy Hood told investors in April that the company was “increasing our agility by reducing layers with fewer managers.”

Context: The layoffs come amid Microsoft’s ongoing legal battle with The New York Times, which has sued Microsoft and partner OpenAI for alleged copyright infringement of news content related to AI systems.