Microsoft shares are on track for one of their worst starts to a year in two decades, down roughly 21% year to date as of Tuesday’s close, as a cloud and sales hiring freeze and a broader “reset” of the Xbox unit have made recent headlines. This comes on top of growing concern over Microsoft’s AI spending boom.
Like much of the technology sector, Microsoft and other tech giants became labor-heavy after years of overhiring before and during the early Covid period. Now, the AI capex boom is forcing a major reassessment.
Hyperscalers are pouring hundreds of billions into data center buildouts, while AI chatbots and automation tools are beginning to replace white-collar tasks. The result is a broad workforce reset across Big Tech, with companies such as Microsoft rethinking headcount.
Business Insider reports that Microsoft is preparing to announce yet another round of job cuts as early as next week. The report was based on people familiar with upcoming labor restructuring efforts.
The layoffs are expected to affect thousands of employees across sales, consulting, and Xbox, though the reductions will be smaller than last year’s reductions. The next round is expected to be around 2.5% of Microsoft’s roughly 220,000-person workforce.
Last year, Microsoft eliminated 6,000 jobs in May and another 9,000 in July, or about 4% of its total workforce.
In April:
A separate report from Bloomberg says that payroll data across the financial activities and information sectors, where AI adoption has been fastest, is currently shrinking jobs by about 28,000 a month on average so far this year.
Goldman analyst Sarah Dong wrote in a note on Tuesday that the current AI adoption rate across corporate America stands at around 20.6% and is increasing.
These white-collar layoffs are likely only beginning to accelerate.
Latest firings:
Our assessment is that displaced workers should not be looking to downshift into low-wage service jobs, such as bartending and server work, as in previous cycles, but instead toward the physical buildout of the AI economy. Data centers, power infrastructure, grid upgrades, cooling systems, and electrical construction are where labor demand is rising, wages are strong, and jobs are plentiful.