Why are Microsoft making lay-offs?

Why is Microsoft making lay-offs?

Microsoft has announced it’s going to cut 5% of its workforce - that's roughly 10,000 jobs.

The firm's CEO, Satya Nadella, admitted that the next couple of years are going to be tough for Microsoft, mainly due to a cooling of demand post-pandemic and the gloomy economic outlook.

The tech industry has been hit pretty hard as of late, with Meta cutting 11,000 employees jobs and Amazon announcing its plans to cut more than 18,000 jobs. So, why is Microsoft doing the same?

Pandemic boom turns into post-pandemic gloom

When lockdowns were in place, Microsoft thrived. Its business model is well positioned for people being stuck at home - more consumers spending money on digital entertainment and devices.

The demand for Microsoft’s cloud technology soared in recent years from an explosion in corporate demand, as the need to work remotely increased. But growth slowed to 35% in the first fiscal quarter of 2023, and Microsoft expects more cooling to come.

This is similar to Amazon and Meta, who also thrived during the pandemic.

Of course, now consumer spending habits have returned to normal, Microsoft has found it isn't quite as profitable. Satya Nadella has called this a ‘normalisation’ in growth rather than downturn.

New investments

When a business makes a serious investment into its future plans, it can affect the existing workforce.

Microsoft's recent $10bn investment into ChatGPT, a revolutionary piece of AI software that acts as a chatbot, indicates the direction the company wishes to head in. It could be that it wants to make room for workers with different skills, perhaps centred around AI.

Satya Nadella, CEO. Scoop quote feature. "It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas."

Avid gamers will also know it's almost been a year to the day since Microsoft announced an acquisition of the $58bn company, Activision Blizzard. Of course, Microsoft's finances a year ago looked a little different from the present day. It's likely a cut of jobs will help fund this acquisition, should it ever happen.

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