Microsoft’s Mass Layoffs

Microsoft is undergoing a significant restructuring, resulting in the loss of thousands of jobs, despite the company’s profits and stock price reaching historic highs. This move sends a chilling message to those concerned about the future of work in the age of artificial intelligence: strong performance and profitability no longer guarantee job security.

The software giant, a key player in the generative AI boom, confirmed to Gizmodo that it is implementing another major round of layoffs. Although Microsoft did not provide an exact figure, stating only that it’s less than 4% of its workforce, Gizmodo estimates the total cuts at approximately 9,000 jobs based on internal announcements and previously reported reductions throughout the year. The company last disclosed its global workforce at 228,000 employees as of June 2024.

The layoffs have unfolded in several phases: fewer than 1% of staff were cut in January due to performance-related issues, more than 6,000 jobs were eliminated in May, and 300 more in June. With this latest wave, Gizmodo calculates the total cuts for July to be around 8,777 jobs, or just under 4% of the global workforce. A Microsoft spokesperson stated, "We continue to implement organizational and workforce changes that are necessary to position the company and teams for success in a dynamic marketplace," without providing further details.

The cuts are impacting various levels, departments, and geographies within the company. A source familiar with the matter revealed to Gizmodo that Microsoft’s gaming division, which includes Xbox, is among the areas affected.

Record Profits, Record Cuts

The timing of the layoffs is in stark contrast to the company’s financial performance. Microsoft is the second-most valuable company in the world, with a market capitalization of $3.65 trillion, trailing only Nvidia. The company is also in excellent financial shape, with its net income jumping 18% to $25.8 billion and revenue climbing 13% to $70.1 billion in the most recent fiscal quarter. CEO Satya Nadella announced in April, "Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth. From AI infrastructure and platforms to apps, we are innovating across the stack to deliver for our customers." However, this innovation may also be making thousands of jobs obsolete.

While Microsoft has not officially linked these job cuts to its rapid adoption of AI, the timing raises questions. At Meta’s LlamaCon conference in April, Nadella told CEO Mark Zuckerberg that 20 to 30% of Microsoft’s code is now written by AI tools. Microsoft CTO Kevin Scott has gone even further, predicting that by 2030, AI will write 95% of all code used at the company.

The tech giant has invested billions in generative AI, most notably through its close partnership with OpenAI. This includes integrating large language models like GPT into Microsoft Office, GitHub, Azure, and Windows products. These tools are capable of writing, debugging, and deploying code, as well as handling administrative tasks, customer support, scheduling, and more. The company is betting that these technologies will reshape how work is done. However, for many employees, especially in tech, AI is already replacing tasks and jobs.

Microsoft Is Not Alone

Across the industry, executives are now openly admitting that AI is shrinking their headcounts. Salesforce CEO Marc Benioff recently said AI is doing "50% of the work" at his company, just before announcing another 1,000 job cuts. Klarna CEO Sebastian Siemiatkowski said AI has allowed the fintech firm to reduce its workforce by 40%. IBM and Duolingo have also confirmed that they are replacing teams or functions with AI systems.

As AI tools become more capable and cheaper than full-time employees, companies may continue to shed workers even while reporting record growth. Microsoft’s latest move only reinforces this trend. For now, the company insists it is simply restructuring to stay competitive. However, for workers watching AI generate code and copy, and executives celebrating those gains, the writing may already be on the wall.