Microsoft Announces Performance-Based Layoffs Amid AI Push and Skill Development Initiatives

Performance-based layoffs hit Microsoft workforce

Microsoft announced a new round of layoffs affecting less than 1% of its global workforce, based on performance evaluations. The job cuts span multiple departments, including the security division, as part of the company's ongoing efforts to focus on high-performance talent. A Microsoft spokesperson stated, "At Microsoft we focus on high-performance talent. We are always working on helping people learn and grow. When people are not performing, we take the appropriate action." The company confirmed the job cuts to CNBC but declined to specify the exact number. Following this latest announcement, Microsoft employees number around 228,000, down from a peak of approximately 236,748 two years ago. The company previously cut 10,000 jobs in January 2023, which represented about 5% of its workforce. Additional layoffs occurred in 2024 after the $75.4 billion acquisition of Activision Blizzard, with nearly 2,000 jobs eliminated in its gaming division to reduce redundancy. Upcoming layoffs reflect a broader trend within the tech industry, where companies are emphasizing efficiency and performance management due to economic pressures. Analysts expect this trend to continue as companies refine their operational strategies. 41% of global firms plan layoffs by 2030 due to AI Amidst the layoffs, Microsoft is also pushing forward with its commitment to artificial intelligence (AI) development. During a recent visit to New Delhi, Chairman and CEO Satya Nadella announced an initiative to train 500,000 individuals in rural India in AI skills, emphasizing the country's significance in the global AI landscape. Nadella stated, "There's tremendous progress in AI skilling in India," highlighting Microsoft's commitment to innovation and growth. Despite the performance-based layoffs, Microsoft remains focused on growth opportunities in cloud computing and AI. The company has invested over $13 billion in its partnership with OpenAI, which has helped propel its market cap past $3 trillion. However, the relationship has faced challenges, with Microsoft CEO Satya Nadella referring to it as "cooperation tension" during discussions with investors. In October 2024, CFO Amy Hood expressed expectations that revenue growth from Microsoft Azure would accelerate in early 2025, supported by enhanced AI infrastructure capacity.

Microsoft announces job cuts, plans to axe 1% of underperforming workforce in 2025: Report

Microsoft has announced new performance-based layoffs affecting less than 1% of its global workforce of 228,000 employees. The company's focus on "high-performance talent" drives these actions, which span multiple departments, including its security division. While layoffs reflect ongoing tech industry trends since 2023, Microsoft's Chairman Satya Nadella unveiled a large-scale initiative to train 500,000 individuals in rural India in artificial intelligence skills, reinforcing the company's commitment to innovation and growth.Microsoft has begun the year with small-scale layoffs across various departments, citing performance as the primary criterion. A spokesperson for the company told CNBC, "At Microsoft, we focus on high-performance talent. We are always working on helping people learn and grow. When people are not performing, we take appropriate action." The job cuts, affecting less than 1% of its 228,000 employees, are part of a broad effort to enhance performance management. Business Insider reported that these layoffs also include employees in the security division. According to sources, managers have spent months evaluating staff performance across all levels, including senior positions. While the company is letting go of underperforming employees, many of the vacated positions may be refilled, ensuring that the overall workforce size remains relatively stable. This is not Microsoft's first round of layoffs in recent years. In 2023, the company cut approximately 10,000 jobs, representing about 5% of its workforce. That year, its Xbox gaming division also saw minor job reductions. In 2024, following the $75.4 billion acquisition of Activision Blizzard, Microsoft dismissed nearly 2,000 employees from its gaming division to eliminate redundancies. Further layoffs during the summer affected its Azure cloud computing unit, initially targeting 1,500 roles, with approximately 1,000 employees ultimately laid off. The broader tech industry has experienced significant downsizing since 2023, with companies like Google and Microsoft prioritising efficiency and performance amid economic pressures. Although it's early in 2025, analysts expect such workforce reductions to continue as companies refine their strategies. Amidst the restructuring, Microsoft is making significant investments in artificial intelligence skill development. During a visit to New Delhi as part of the Microsoft AI Tour, Chairman and CEO Satya Nadella announced a collaborative initiative with India's Ministry of Electronics and Information Technology (MeitY). The programme aims to train 500,000 individuals in rural India in artificial intelligence skills. "There's tremendous progress in AI skilling in India," Nadella stated, emphasising the country's vital role in the global AI landscape. This initiative is designed to empower underserved communities by equipping them with cutting-edge technological expertise. Despite workforce adjustments, Microsoft remains focused on growth opportunities in artificial intelligence and cloud computing. The company's partnership with OpenAI, in which it has invested over $13 billion, underscores its ambition in the AI sector. While tensions with OpenAI have emerged, Microsoft's AI-driven products, such as the Microsoft 365 Copilot assistant, continue to develop and gain traction. In October 2024, Chief Financial Officer Amy Hood indicated that revenue growth from Microsoft Azure, supported by AI infrastructure, is expected to accelerate in early 2025. These initiatives signal the company's dual focus on operational efficiency and innovation.