Microsoft has announced another round of significant layoffs, impacting around 9,000 employees. This move follows a similar round of workforce reductions earlier this year and marks the largest scale job cuts by the company in over two years. The layoffs, which began on Wednesday, are mostly affecting the Xbox video game division along with other sectors within Microsoft.
According to a notification sent to Washington state officials, 830 employees at Microsoft’s Redmond headquarters are included among those laid off. The job cuts, stemming from various global teams including the sales department, are described by Microsoft as part of necessary “organizational changes” needed to thrive in a continually evolving market landscape. The company has not disclosed the total number of jobs affected, but it accounts for about 4% of its workforce from the previous year.
Phil Spencer, CEO of Xbox, noted in a memo to the gaming division that the layoffs would better position the video game branch for long-term success by concentrating on strategic growth areas. He emphasized the intention to reduce management layers within Xbox to enhance operational agility and efficiency.
As of June 2024, Microsoft reported that it employed 228,000 full-time workers globally. The latest layoffs represent under 4% of this workforce. The newest reductions follow three previous rounds of job cuts earlier this year, making it unlikely that new hires have balanced out the losses. A 4% staffing cut equates to about 9,000 positions.
The substantial layoffs earlier this year occurred in May when the company eliminated about 6,000 jobs, constituting nearly 3% of its global workforce and marking the most extensive job reductions by Microsoft in more than two years. Despite these layoffs, Microsoft continues to invest heavily in infrastructure supporting its AI ambitions, estimating an expenditure of approximately $80 billion for the previous fiscal year, which ended just as the new fiscal year began.
Just last month, Microsoft also slashed 300 positions at its Redmond headquarters. Prior to this, nearly 2,000 jobs were cut in the Puget Sound area in May, specifically within software engineering and product management roles, as communicated to Washington state employment authorities.
During an earnings call in April, Microsoft’s CFO Amy Hood discussed the company’s strategy of streamlining its workforce, focusing on building high-performing teams by reducing managerial layers. These labor cuts are repeatedly framed by Microsoft as efforts to trim management. However, the layoffs targeting software engineering have sparked concerns that Microsoft’s AI-driven code-writing tools might eventually reduce the necessity for human programmers.
In prior remarks, CEO Satya Nadella indicated that AI could potentially handle around 20 to 30% of code writing tasks for certain projects. Commenting on the layoffs, analyst Dan Ives from Wedbush Securities suggested that these cuts aim at less dynamic business areas, emphasizing Microsoft’s focus on artificial intelligence, cloud technology, and future-oriented developments.
According to Ives, Microsoft appears to be making efforts to enhance efficiency by cutting costs associated with Xbox and other legacy areas within the company. He observed that the company had overhired over the years and is now undergoing a strategic realignment to better meet Wall Street’s expectations for operational efficiency.
These reductions also come after Microsoft’s expansion of its gaming business, highlighted by its $75.4 billion purchase of Activision Blizzard in 2023, known for popular gaming franchises like Call of Duty and Candy Crush. Previously, in seeking to rival Sony’s PlayStation, Microsoft invested $7.5 billion acquiring ZeniMax Media, the parent of Bethesda Softworks. Many employees from these gaming studios, which span across North America and Europe, have publicly shared on social media their displacement due to the recent cuts and are actively seeking new employment opportunities.