Microsoft plans to lay off 10,000 employees as part of broader cost-cutting measures, the company said in a statement. Filing of securities On Wednesday, it became the latest tech company to cut staff due to growing economic uncertainty.
Speaking before 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 the weak global economy.
“There’s gravity and no one can beat the gravity of inflation-adjusted economic growth,” he told WEF founder Klaus Schwab in a live telecast discussion.
A memo Speaking to employees on Wednesday, Nadella cited years of demand for digital services becoming epidemic and fears of a recession.
“We live in times of significant change, and as I meet with clients and partners, a few things are clear,” he wrote. “First, we saw consumers accelerate their digital spending during the pandemic, and now we’re seeing them leverage digital spending to spend more with less.”
As of June 30, 2022, Microsoft had approximately 221,000 full-time employees worldwide, including 122,000 employees based in the United States, according to a filing with the US Securities and Exchange Commission.
Nadella said the cuts represent less than 5% of the company’s total workforce and will be completed by the end of the third quarter of this year’s fiscal year, which ends in March.
He said the company will take a $1.2 billion charge in its second quarter related to “segmentation costs, changes to our hardware portfolio and the cost of lease consolidation.”
“These decisions are difficult, but necessary,” Nadella wrote.
Many tech companies have made deep cuts to their workforces since the start of the year as inflation weighs on consumer spending and rising interest rates strain finances. Demand for digital services has decreased during the pandemic as people return to their offline lives.
(AMZN) It announced plans to lay off 18,000 people and Salesforce said it would cut 10% of its workforce. Facebook
(FB) Parent Meta also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft was laying off fewer than 1,000 employees across multiple divisions.
Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for over-hiring early in the pandemic and misreading how demand for their products would slow once Covid-19 restrictions eased.
Although the overall labor market is tight, layoffs in the tech sector have increased at an alarming rate. A recent report from outplacement firm Challenger, Gray & Christmas found that tech layoffs are up 649% in 2022 compared to the previous year, compared to just 13% of job cuts in the economy as a whole over the same period.
Microsoft will report second-quarter earnings on January 24. The software company’s Azure cloud computing business posted revenue growth in the three months to September as sales in its personal computer division fell slightly.
Even as Microsoft makes significant cuts, Nadella said the company will continue to invest in “strategic areas for our future,” and pointed to advances in AI as “the next big wave.” His letter to employees comes amid rumors of a significant investment from Microsoft in OpenAI, the company behind AI chatbot ChatGPT.