Microsoft plans to lay off 10,000 employees as part of broader cost-cutting measures, the company said in a presentation of values on Wednesday, becoming the latest technology company to cut staff due to growing economic uncertainty.
Speaking ahead of the layoff announcement at the World Economic Forum (WEF) in Davos, Switzerland on Wednesday, Microsoft CEO Satya Nadella said the company was not immune to a weaker global economy.
“Nobody can defy gravity, and gravity here is inflation-adjusted economic growth,” he told World Economic Forum founder Klaus Schwab in a livestreamed discussion.
in a memorandum to employees on Wednesday, Nadella also cited changing demand from the post-pandemic years for digital services, as well as fears of an impending recession.
“We are living in times of significant change, and when I meet with clients and partners, some things are clear,” he wrote. “First, as we saw customers accelerate their digital spend during the pandemic, now we see them optimize their digital spend to do more with less.”
Microsoft had approximately 221,000 full-time employees worldwide as of June 30, 2022, according to a US Securities and Exchange Commission filing, with about 122,000 of those employees in the United States.
Nadella said the job cuts represent less than 5% of the company’s total workforce and that the reductions will be completed by the end of this year’s fiscal third quarter, which ends in March.
It said the company will incur a $1.2 billion charge in its second quarter related to “severance costs, changes to our hardware portfolio, and the cost of lease consolidation.”
“These decisions are difficult, but necessary,” Nadella wrote.
Multiple tech companies have made deep cuts to their workforce since the start of the year as inflation weighs on consumer spending and rising interest rates squeeze funding. Demand for digital services during the pandemic has also declined as people return to their lives offline.
(AMZN) announced it plans to lay off 18,000 people and Salesforce said it is cutting 10% of its staff. Facebook
(FULL BOARD) Parent company Meta also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft had laid off fewer than 1,000 employees in various divisions.
Technology CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for overhiring early in the pandemic and misinterpreting how a surge in demand for their products would cool once prices eased. Covid-19 restrictions.
While the overall job market remains tight, layoffs in the tech sector have increased at a staggering rate. A recent report from outsourcing firm Challenger, Gray & Christmas found that tech layoffs are up 649% in 2022 compared to the previous year, compared to just a 13% increase in job cuts in the broader economy over the past year. the same period.
Microsoft will announce second-quarter earnings on January 24. The software company’s Azure cloud computing business drove revenue growth for the three months through September, as sales at its personal computing division dipped slightly.
Even as Microsoft makes significant cuts, Nadella said the company will continue to invest in “strategic areas for our future,” calling advances in AI “the next big wave” of computing. His letter to employees comes amid rumors of a significant investment by Microsoft in OpenAI, the firm behind the AI chatbot ChatGPT.