Microsoft announced on Wednesday that it will lay off nearly 4% of its global workforce, a move aimed at rein in costs amid significant investments in artificial intelligence (AI) infrastructure.

Current Workforce and Previous Layoffs

As of June 2024, Microsoft employed approximately 228,000 individuals worldwide. This announcement follows a previous layoff in May, which affected around 6,000 workers. Reports from Bloomberg indicated that additional job cuts were anticipated, particularly within the sales sector.

Financial Context: Rising Costs and AI Investments

The tech giant has pledged $80 billion in capital spending for its fiscal year 2025. However, the increasing expenses associated with scaling its AI infrastructure have put pressure on the company’s profit margins, with expectations of a decrease in cloud margins for the June quarter compared to the previous year.

Organizational Changes Planned

Microsoft plans to reduce organizational layers, which means fewer managerial positions, in an effort to streamline its products, procedures, and roles.

Impact on the Gaming Division

The layoffs also affect Microsoft’s gaming division. Reports state that the company’s Barcelona-based King division, known for creating the popular Candy Crush video game, is set to cut approximately 10% of its workforce, equating to around 200 jobs.

Confirmation of Gaming Division Cuts

Microsoft confirmed to Reuters that its gaming division was impacted by the layoffs, though not the majority of the unit. Further details on the specific impacts on teams were not disclosed.

Trends in the Tech Industry

Microsoft isn’t the only tech company navigating these turbulent waters; many of its peers are also pursuing job cuts while heavily investing in AI.

Peer Comparisons: Meta and Google

Earlier this year, Facebook’s parent company, Meta, announced it would be trimming about 5% of its “lowest performers.” Similarly, Alphabet’s Google has laid off hundreds of employees over the past year.

Amazon’s Job Cuts

Amazon has also made significant job cuts across various business segments. The recent layoffs in its books division followed earlier reductions within its devices and services unit, as well as in communications staff.

Economic Conditions Influencing Layoffs

The ongoing economic uncertainties and rising costs are triggering layoffs across different sectors in Corporate America. Companies are increasingly rushing to streamline operations to mitigate further cost pressures.

As Microsoft and other tech giants adjust to a rapidly changing economic landscape, the focus remains on controlling costs while continuing to invest heavily in AI. The strategic layoffs reflect the challenges companies face in balancing growth against financial prudence.