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Microsoft has terminated 9,100 staff, almost 4 per cent of its total workforce, in an effort to cut costs at a time when it is heavily investing in AI.
The company has said that the layoffs, which are the largest since 2023 when it fired 10,000 staff, are to best place the business for success going forward.
“We continue to implement organisational changes necessary to best position the company and teams for success in a dynamic marketplace,” a company spokesperson told media.
Microsoft’s decision to let go of thousands of staff is part of a trend within the technology sector, which is reversing the expansion it saw during the COVID-19 pandemic.
The staff cuts are understood to affect a number of teams and countries across Microsoft’s operations, with the Xbox and gaming division being hit particularly hard.
King, the Microsoft-owned maker of mobile game Candy Crush, has had to cut 200 employees, roughly 10 per cent of its workforce.
The teams at the Forza Motorsport studio and Zenimax have also seen staff cuts, while the company has cancelled two games: Everwild and Perfect Dark, with the studio behind the latter also closing down thanks to layoffs.
Microsoft only recently announced that 6,000 employees would be laid off, only two months ago, while 1,900 Activision Blizzard and Xbox staff were axed in January last year. In September, 650 Xbox employees were also terminated, while 1,000 people were axed from the Azure Cloud and HoloLens teams in June.
Microsoft’s brutal cuts come at a time when it is investing heavily in AI. It said in January that it projected an US$80 billion AI data centre spend for the 2025 fiscal year and announced a US$400 million investment in AI in Switzerland in June.
The company’s CEO, Satya Nadella, also said it would look at lowering its AI data centre building costs.
“We continue to optimise and drive efficiencies across every layer, from data centre design to hardware in silicon to system software to model optimisation,” Nadella said.
“All towards lowering costs and increasing performance.”
However, its investment in AI is delivering results. The company’s Azure Cloud AI is reportedly set to deliver 33 per cent annual growth through 2028, up from a 27 per cent estimate. This could lead to US$200 billion in revenue.
By 2032, fourteen to 16 per cent of all technology spending will be on generative AI, equating to US$1.8 trillion, according to intelligence analysts at Bloomberg.
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