Microsoft announced on Wednesday that it will lay off 10,000 people over the next few months as the economic slump continues to impact US technology companies.
The employment cuts would touch slightly less than five percent of staff and follow similar decisions by Facebook owner Meta, Amazon, and Twitter, which have announced hundreds of layoffs in the formerly unconquerable digital industry.
Microsoft Mass Layoffs
The reductions were a reaction to macroeconomic conditions and shifting consumer preferences, according to a US regulatory filing by the manufacturer of the Windows operating system.
The layoffs follow a massive hiring frenzy at the height of the coronavirus pandemic when businesses struggled to fulfill demand as more and more people went online for work, shopping, and entertainment.
When asked about the layoffs prior to the announcement, Microsoft CEO Satya Nadella stated that no one can resist gravity and cited the high inflation that was impeding global economic development.
According to Microsoft’s filing with the US Securities and Exchange Commission, the company’s next earnings report will include a charge of $1.2 billion. These are due on January 24, when the Redmond, Washington-based firm is expected to report its slowest revenue growth in years.
As some sections of the world are experiencing a recession and others are anticipating one, he stated that businesses everywhere were exercising caution.
According to the news website Axios, Microsoft has already conducted two rounds of layoffs, the first in July, which affected less than one percent of the workforce, and the second in October, which affected less than a thousand employees.
Nadella did not specify which departments will be affected by the next round of layoffs, but he did say that the software giant would continue to hire in important strategic areas, citing artificial intelligence as a crucial growth sector.
Microsoft also owns the professional network LinkedIn, the search engine Bing, and the Xbox video game business, in addition to its software and cloud-computing divisions.
The wave of layoffs in the IT industry has been rewarded by the stock market, which had been increasingly concerned about the excessive spending of US technology companies.
Meta’s stock price has increased by 35 percent after it announced 11,000 layoffs on November 9, while Amazon’s stock has increased by more than 15 percent since the company disclosed 18,000 layoffs earlier this month.
Following the announcement of layoffs on Wednesday, Microsoft shares declined by 1.9% during the trading session, bucking the current trend.
Wedbush Securities analyst Dan Ives stated in a note that Microsoft had hired 75,000 new employees since the beginning of 2019, according to the company’s website.
In the face of difficult economic conditions, he stated that markets will continue to praise the tear-the-band-aid-off plan.
According to analysts, Microsoft’s ambitious purchase strategy, which includes a large offer to acquire gaming company Activision, will not be derailed by the gloomy outlook.
Microsoft is also reportedly set to invest $10 billion in the Californian startup OpenAI, which developed the much-hyped ChatGPT bot that can compose sophisticated poems, essays, or complex computer code in a matter of seconds.