Microsoft is cutting more jobs this week, with CEO Satya Nadella confirming 10,000 layoffs during what the executive described as “times of significant change.” The job losses reportedly affect people at Xbox and Bethesda, in addition to Microsoft’s wider teams at large.
In a memo to staff, Nadella said the 10,000 layoffs–which amount to less than 5% of the company’s total workforce of more than 220,000–will take place beginning today, January 18, through the end of its third quarter of fiscal year 2023. According to The New York Times, Microsoft hired more than 75,000 people since 2019 to help meet demand for the growing interest in online services and cloud computing due to the onset of the pandemic.
This is just the latest round of layoffs at Microsoft, as Nadella eliminated around 25,000 jobs between 2014 and 2015 as a result of abandoning the company’s Nokia business.
“It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas. We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible,” Nadella said.
The CEO did not say which departments within Microsoft are affected, but Bloomberg reported that Microsoft’s Xbox and Bethesda divisions are affected in some capacity.
Explaining the job cuts, Nadella said they stem from Microsoft’s making adjustments to its business in response to the pandemic, looming recession fears, and advancements to AI technology.
“First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,” he said. “At the same time, the next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.”
Nadella said he is confident that Microsoft will “emerge from this stronger and more competitive.”
Microsoft will make “strategic” investments as it looks to future growth, with AI being one of these pillars, while the company will also “divest” in other areas, Nadella said.
“These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts,” Nadella said.
Microsoft will incur a $1.2 billion charge due to severance costs for outgoing employees, as well as “changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.”
Nadella described the job cuts as “difficult, but necessary.” He said affected employees will receive Microsoft’s “full support,” and this includes “above-market” severance pay, healthcare for six months, ongoing vesting of stock awards for six months, career transition services, and 60 days’ notice before termination for those not yet notified. This applies to Microsoft workers in the US. Affected workers outside the US will receive benefits aligned with local employment laws.
For Microsoft’s latest quarter, the company earned $50.1 billion in revenue, which was up 11%, and made a profit of $17.6 billion (down 14%).
Looking ahead, Microsoft is reportedly going to invest $10 billion into OpenAI and continues to try to acquire Activision Blizzard for $68.7 billion.
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