Microsoft is planning to lay off as much as 3 percent of its global staff, according to Bloomberg reports. With Microsoft’s workforce totaling approximately 228,000 employees at the end of June 2024 (the latest figure reported), this could result in around 6,000 to 6,800 individuals being let go, as stated by CNBC.
This verifies the speculations from the previous month. The layoffs will occur in various regions and among different teams and employee levels. “We are continuing to implement organizational changes that are essential to best prepare the company for success in an evolving marketplace,” a spokesperson for the company told CNBC.
Microsoft intends to eliminate 1,985 positions at its headquarters in Redmond, with 1,510 of those positions located in the office. One objective is to minimize the number of management layers, according to the spokesperson. Unlike the previous job cuts in January 2025, which affected “low performers,” these layoffs are not related to performance.
It remains unclear whether the layoffs will also impact the Xbox games division, but Microsoft has frequently reduced jobs in that area in recent years.
These job cuts seem inconsistent with the recent business performance. At the end of April, Microsoft announced a quarterly net profit of $25.8 billion, surpassing expectations, and also provided a positive outlook.
Severely impacted was the tech giant’s home state of Washington, where Microsoft notified state officials about cutting 1,985 jobs linked to its Redmond headquarters, many of which were in software engineering and product management positions.
Microsoft indicated that layoffs will affect all levels, teams, and locations, but the cuts will target decreasing the number of managers. Notifications to employees began on Tuesday.
The extensive layoffs come only weeks after Microsoft reported robust sales and profits that exceeded Wall Street forecasts for the January-March quarter, which investors interpreted as a source of relief during a challenging period for the tech industry and the U.S. economy.
“I believe many people view layoffs as something only companies in distress must do to survive, which is one reason for layoffs but not the only one,” remarked Daniel Zhao, the lead economist at the workplace review platform Glassdoor. “Large tech firms have reduced their workforces as they adapt their strategies and scale back from the more aggressive hiring observed in the early post-pandemic years.”
Microsoft employed 228,000 full-time individuals as of last June, the last time it disclosed its annual headcount. Approximately 55% of these employees were based in the U.S.
In January, Microsoft communicated a smaller round of layoffs based on performance. However, the 3% reductions represent Microsoft’s largest cuts since early 2023, when the company laid off 10,000 employees, nearly 5% of its workforce, joining others in the tech sector that were scaling back their pandemic-related expansions.
Microsoft’s chief financial officer, Amy Hood, mentioned on an April earnings call that the company was focused on “creating high-performing teams and enhancing our agility by decreasing layers with fewer managers.” She also noted that the headcount in March was up by 2% compared to a year prior but down slightly from the end of the previous year.
The layoffs are affecting all segments of Microsoft’s operations, including the Xbox video game platform and LinkedIn, the career networking site. Some of the workers who were laid off, along with the executives involved in the cuts, shared their thoughts on LinkedIn.
“This is the first occasion I’ve had to lay off people to support business objectives that aren’t my own,” wrote Scott Hanselman, a vice president in Microsoft’s developer community. “I often struggle to separate my feelings from the system I am involved in and complicit with. These are individuals with aspirations and rent obligations, and I care for them and want them to be alright.”
He also stated: “This is a day filled with much sadness.”
The company did not specify a particular reason for the layoffs, only indicating that they were part of “organizational changes essential to position the company effectively for success in a dynamic marketplace.”
Microsoft has mentioned that it is investing $80 billion in the fiscal year ending in June on constructing data centers and other infrastructure necessary for developing its artificial intelligence technology, although some of those projects have also been scaled back. These AI tools have been presented as transforming the way work is conducted, including within Microsoft’s own offices.
Microsoft’s CEO Satya Nadella mentioned to Meta’s CEO Mark Zuckerberg at an AI event last month at Meta’s headquarters that “perhaps 20 to 30% of the code” for certain coding initiatives at Microsoft “is likely all created by software.”
Although AI is increasingly assisting Microsoft software engineers, it doesn’t automatically indicate that it is the primary factor behind their layoffs.
“When these major tech companies announce they’re reducing management levels, that doesn’t necessarily indicate it’s due to AI,” Zhao remarked. “You wouldn’t expect ChatGPT to take over the role of a manager.”
Rather, trimming management positions often signals a larger strategic approach.
“As companies expand rapidly, there’s a need to introduce managers who can oversee coordination across or within teams,” Zhao explained. “However, it’s only when the pace slows that people begin to question the necessity of those positions.”
Among the employees laid off in Washington, approximately 1,500 worked physically at Microsoft’s offices, while 475 were remote employees, according to the notice provided to the state employment agency. Their official last working day will be in July.
After a period of intense hiring that began when the COVID-19 pandemic increased demand for online services, many tech firms are still in a stage of “returning to normal and attempting to readjust some aspects,” noted Cory Stahle, an economist at Indeed, the job listing platform.
While Microsoft isn’t as significantly impacted by President Donald Trump’s broad tariffs as some other companies, it still needs to consider the wider economic conditions that may arise in the upcoming months and years.
“This could be an initiative to adopt a more long-term perspective,” Stahle suggested. “If you need to buy groceries and deal with higher costs due to tariffs, you might end up with less disposable income for purchasing electronics or gaming consoles.”
Microsoft has just reported its third quarter financial results for the 2025 fiscal year. The software company generated $70.1 billion in revenue and a net income of $25.8 billion during Q3. Revenue has increased by 13 percent, while net income has risen by 18 percent. Microsoft was projected to generate $68.42 billion in revenue, so the outcomes have surpassed Wall Street expectations.
The growth of cloud services seems to be the primary factor behind the improved revenues, as Microsoft Cloud revenue reached $42.4 billion, marking a 20 percent increase. Microsoft has not disclosed specific revenue figures for its AI segment, making it unclear how rapidly that part of its business is growing.
With ongoing attention on the effects of Trump’s tariffs and consumer spending trends, Microsoft also recorded a 3 percent year-over-year growth in Windows OEM and devices revenue. Both businesses and consumers are upgrading their PCs and laptops ahead of the Windows 10 end of life in October, although there hasn’t been a significant increase in Windows OEM revenue at this point. Microsoft attributes part of the Windows OEM growth to “inventory levels remaining high due to tariff uncertainty.”
Microsoft has now merged Surface revenue with Windows OEM revenue, so it’s no longer easy to determine the performance of its Surface line. In the recent quarter, Microsoft hasn’t introduced any new consumer Surface devices, although they did start selling Intel-powered versions of the Surface Pro 11 and Surface Laptop 7 for businesses in February. Speculation about smaller versions of the Surface Pro and Surface Laptop launching soon is also circulating.
In the gaming sector, Microsoft indicated last quarter that Xbox hardware revenue would decline, and it has indeed done so again. Xbox hardware has decreased by 6 percent this quarter, even as Microsoft has been releasing a variety of games via Game Pass. Overall gaming revenue at Microsoft has risen by 5 percent.
Xbox content and services, which encompass Game Pass, have increased by 8 percent, although Microsoft hasn’t shared any new subscriber numbers for Game Pass, with the latest update from February 2024 reporting 34 million subscribers, which includes Xbox Game Pass Core (previously Xbox Live Gold) members.
Over the past year, Microsoft has been advancing its strategy to make more previously Xbox-exclusive titles available on PlayStation and Nintendo Switch. This strategy has proven successful, with preorders for Indiana Jones and the Great Circle and Forza Horizon 5 leading the PlayStation Store last month.
”We concluded the quarter as the leading publisher for preorders and preinstalls on both Xbox and PlayStation Store,” noted CEO Satya Nadella during the company’s earnings call. Revenue from PC Game Pass also grew by 45 percent year-over-year, and “cloud gaming reached a new milestone, exceeding 150 million hours played for the first time this quarter,” Nadella disclosed.
Microsoft’s strategy of making Xbox available everywhere — which I’ve been following closely in my Notepad newsletter throughout the past year — will also feature games for the Nintendo Switch 2. This year, Microsoft is working on a comparable roster of games to transfer to the Switch 2.
As is typical with Microsoft’s earnings reports, the company’s Office and cloud sectors are again the highlights. Revenue from Microsoft 365 commercial products and cloud services has grown 11 percent compared to last year, and even the consumer office segment has seen a 10 percent increase in revenue. The number of Microsoft 365 consumer subscribers has now reached 87.7 million.
Earlier this year, Microsoft integrated its Office AI functionalities into Microsoft 365 Personal and Family subscriptions and increased costs. In the past, Microsoft 365 subscribers needed to pay an additional $20 per month for access to Copilot in Office applications like Word, Excel, and PowerPoint through a Copilot Pro subscription, but Microsoft has now included these AI features in Microsoft 365 apps for an additional $3 per month.
Current subscribers have the option to decline the AI features without facing a price hike, though it is uncertain how many have chosen this option. Microsoft does indicate that there has been an increase in revenue per user following the January price adjustment, which has been somewhat mitigated by a “continued mix shift” toward the $1.99 monthly Microsoft 365 Basic subscription.
In what the company terms intelligent cloud, Microsoft has seen revenue rise by 21 percent year-over-year to $26.8 billion, which is precisely double the revenue generated by Windows, Xbox, and search and news advertising (classified as more personal computing). Revenue from server products and cloud services has increased by 22 percent, with Azure experiencing a growth of 33 percent.
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