Microsoft is set to announce significant job cuts next week, with thousands of positions eliminated in an effort to manage costs amid rising concerns about excessive spending on artificial intelligence.
Fewer than 5,500 employees, which is less than 2.5% of the company’s 220,000 workforce, will be affected, particularly within Xbox’s gaming sector and its sales and consulting units, as reported by Business Insider.
The Seattle-based tech giant plans to unveil these job reductions shortly after its new fiscal year begins on Wednesday, although the schedule might change. Some employees facing layoffs may receive new roles within Microsoft right away.
Microsoft has chosen not to comment on these developments.
This marks the third significant layoff for the company within a little over a year, following a total reduction of 6,000 jobs in May of last year, and another 9,000, which accounted for about 4% of the workforce, in July.
As AI technology rapidly advances, the corporation is projected to invest $190 billion in infrastructure over the next few years. However, this has raised apprehensions regarding high expenditures on new tech, as well as worries that bots could render traditional software irrelevant.
Following a 19% drop in Microsoft’s stock price in June, its most significant monthly decline since the dot-com crash, the news of further layoffs isn’t unexpected. Earlier this year, Microsoft initiated a voluntary retirement offer to U.S. employees aged 70 or above with sufficient years of service, and about a third of those eligible accepted the offer. This could help limit the number of positions available for elimination, according to reports.
In its gaming division, job cuts are anticipated as Xbox’s new CEO, Asha Sharma, emphasized the need for a “reset” within the company, citing its “unhealthy” state due to lagging sales.
Over the last two years, Xbox has seen studio closures, a halt in new game releases, and hardware price hikes in response to rising component costs linked to a surge in demand for data center chips. For instance, last week, Apple announced increases of up to $500 for its computers and devices due to chip shortages, prompting Xbox to follow suit with a $150 price rise across its console lineup.
This year, a substantial portion of layoffs has impacted the tech sector, with AI identified as the primary reason for the cuts, according to a report from Challenger, Gray & Christmas. Andy Challenger, a workplace expert, noted that while layoffs decreased in June, technology-focused job reductions persist, driven by the evolving landscape of artificial intelligence.
He pointed out that since the beginning of 2023, AI has been linked to nearly 173,568 layoffs, signifying its rising influence on workforce dynamics.
