Microsoft plans third round of layoffs, primarily from sales division as as AI spending intensifies: Report

Microsoft is preparing to lay off thousands of employees, primarily in its sales division, as part of company’s latest move to trim its workforce amid significant spending on artificial intelligence. The job cuts are expected to be announced early next month, following the end of Microsoft’s fiscal year, according to people familiar with the matter, reported Bloomberg, citing said the unnamed sources.

New round of Microsoft layoffs are expected to be announced early next month, but the timeline may shift.(Ronny Hartmann/AFP)

While sales teams will be notably affected, the layoffs may extend to other departments as well, the report added. The timeline, however, could still shift, said the sources.

The tech giant has intensified its focus on AI investments, seeking to strengthen its position as industries increasingly integrate AI into products and services to stay competitive. Microsoft has planned $80 billion in capital expenditure for the current fiscal year, the bulk of which will go toward building data centres to support AI infrastructure.

The company declined to offer a comment on the impending lay offs. These planned reductions follow a round of job cuts in May that affected 6,000 roles, mostly in product and engineering, sparing customer-facing divisions such as sales and marketing. That lay off round was the second-largest since 2023, when approximately 10,000 positions were eliminated, coinciding with Microsoft’s pivot toward AI to stay ahead of rivals.

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In April, Microsoft informed employees that it would use third-party firms to handle more software sales to small and mid-sized customers. The company stated it regularly assesses its organisational structure to ensure investments are aligned with long-term growth.

With ongoing spending in the tens of billions on servers and data centers, executives have pledged to Wall Street, and cautioned staff, that it would keep a lid on spending in other areas. As of June 2024, Microsoft employed 228,000 people, 45,000 of whom were in sales and marketing. The company frequently makes organizational changes at the end of its fiscal year, which closes in June.