DAVOS, Switzerland: Microsoft Corp on Wednesday (Jan 18) said it would eliminate 10,000 jobs and take a US$1.2 billion charge to earnings, as its cloud-computing customers reassess their spending and the company braces for potential recession.
The layoffs add to the tens of thousands announced in recent months across the technology sector, which has downshifted following a strong growth period during the pandemic.
The news comes even as the software maker is set to ramp up spending in generative artificial intelligence that the industry sees as the new bright spot.
In a note to employees, CEO Satya Nadella attempted to address the divergent outlook for different parts of the business.
Customers wanted to “optimize their digital spend to do more with less” and “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.”
Nadella said the layoffs, affecting less than 5 per cent of Microsoft’s workforce, would conclude by the end of March, with notifications beginning Wednesday.
However, Microsoft would keep hiring in “strategic areas,” he said. AI is likely to be one of those areas. Nadella this week touted AI to world leaders gathered in Davos, Switzerland, claiming the technology would transform its products and touch people around the globe.
Microsoft has looked at adding to its US$1-billion stake in OpenAI, the startup behind the Silicon Valley chatbot sensation known as ChatGPT, which Microsoft plans to soon market through its cloud service.
Shares of the Redmond, Washington-based company ended 2 per cent lower on Wednesday.
The announcement corresponds with the start of layoffs at its retail and cloud-computing rival Amazon.com Inc, which started notifying employees Wednesday of its own 18,000-person job cuts.
In an internal memo seen by Reuters, Amazon said that affected workers in the United States, Canada and Costa Rica would be informed by the end of the day. Employees in China will be notified after the Chinese New Year.
Facebook parent Meta Platforms Inc has announced cuts of 11,000 jobs, while cloud-based software company Salesforce Inc said it would cut 10 per cent of its 80,000-member workforce.
Overall, in 2022, more than 97,000 job cuts in tech were announced, the highest for the sector since 2002, when 131,000 cuts were announced, according to outplacement firm Challenger, Gray & Christmas.