Microsoft to lay off 10,000 employees, company says in statement

Microsoft will lay off 10,000 employees as part of broader cost-cutting measures, the company said in a statement on Wednesday, becoming the latest technology company to rethink its hiring amid the economic uncertainty.

Speaking ahead of the resignation announcement at the World Economic Forum in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella said the company was not immune to a weaker global economy.

“Nobody can defy gravity and gravity here is inflation-adjusted economic growth,” he told WEF founder Klaus Schwab in a live-streamed discussion.

In a memo to employees on Wednesday, Nadella also cited shifts in demand for years of digital services during the pandemic, as well as fears of an impending recession.

“We are living in times of significant change, and when I meet with customers and partners, some things become clear,” he wrote. “First, as we saw customers accelerate their digital spending during the pandemic, now we see them optimize their digital spending to do more with less.”

Microsoft had approximately 221,000 full-time employees globally as of June 30, 2022, according to a US Securities and Exchange Commission filing, with approximately 122,000 of those employees based in the United States.

Nadella said the job cuts represent less than 5% of the company’s total workforce and the reductions will be completed by the end of this year’s fiscal third quarter, which ends in March.

He said the company will incur a $1.2 billion charge in its second quarter related to “termination costs, changes to our hardware portfolio and lease consolidation cost.”

“These decisions are difficult but necessary,” Nadella wrote.

Several tech companies have made deep cuts to their workforces since the start of the year as inflation weighs on consumer spending and rising interest rates squeeze funding. Demand for digital services during the pandemic has also declined as people return to their offline lives.

Amazon announced it plans to lay off 18,000 people and Salesforce said it is cutting 10% of its staff. Meta, Facebook’s parent, also recently announced 11,000 job cuts, the biggest in the company’s history. In October, Axios reported that Microsoft had laid off less than 1,000 employees across multiple divisions.

Tech CEOs from Mark Zuckerberg of Meta to Marc Benioff of Salesforce have blamed themselves for excessive hiring early in the pandemic and for misinterpreting how a surge in demand for their products would cool once Covid-19 restrictions eased .

While the overall job market remains tight, layoffs in the tech sector have increased at an impressive pace. A recent report by outplacement firm Challenger, Gray & Christmas found that tech layoffs increased by 649% in 2022 compared to the previous year, versus just a 13% increase in job cuts in the wider economy during the same period.

Microsoft will announce second quarter results on January 24th. The software company’s Azure cloud computing business drove revenue growth in the three months to September, as sales in its personal computing division slowed slightly.