Key Highlights
- Microsoft adds to the increasing list of technology companies laying off workers since the economy tightens.
- It is no longer sustainable to keep the high count of employees hired during the peak of the COVID-19 pandemic.
Microsoft announced it would cut nearly 10,000 employees by the end of its third quarter, i.e., by 31st March. CEO Satya Nadella said in an email to employees that the layoffs represent less than 5% of Microsoft’s workforce. No more details are provided regarding the layoffs, such as what types of positions will be affected.
Nadella stated that the company would align its cost structure with its revenue and where it sees customer demand. He also cited that customers are optimizing their digital spending to do more with less, and organizations are exercising caution due to the current economic climate.
More Details On Layoffs Will Be Available On 24th January
Microsoft is scheduled to report its second-quarter financial results on 24th January, and it is expected that more information on the layoffs and the changes will be available then.
The news of the layoffs follows the trend of other technology companies that have also been laying off workers as the economy tightens and the ramped-up hiring during the peaks of the coronavirus pandemic no longer proves sustainable.
The layoffs represent a significant shift for Microsoft, which had been on a hiring spree in recent years as it pivoted to the cloud and expanded into new areas such as gaming, artificial intelligence, and security.
According to Nadella, Microsoft will also make unspecified changes to its hardware portfolio and consolidate its retail leases to “create higher density across our workspaces.” The layoffs and changes will result in a $1.2 billion second-quarter charge for Microsoft.
Microsoft Cloud Revenue
Microsoft reported healthy growth in its cloud division, despite the effects of a strengthening US dollar in terms of foreign exchange rates and a challenging macroeconomic environment.
Microsoft Cloud revenue, including sales of Microsoft Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties, exceeded $25 billion for the second straight quarter at $25.7 billion, a 24% growth from the prior-year period.
But revenue growth from Microsoft Azure and other cloud services decreased to 35%, a drop from the 50% growth reported in the prior-year quarter and 40% growth in the previous quarter.
The company’s total headcount grew by 22% year-over-year in that quarter, which included approximately six points from its acquisitions of Nuance and Xandr.
