Tech giant Microsoft is laying off 10,000 of its employees to cut costs as they prepare for slower revenue growth this year.
In a security filing held last Wednesday, Microsoft CEO Satya Nadella said the company will spend $1.2 billion in its second quarter due to severance costs, changes to the hardware lineup and lease consolidation.
During the World Economic Forum in Davos, Switzerland, the CEO acknowledged that Microsoft is not exempted from the effects of a weakening global economy. “No one can defy gravity and gravity here is inflation-adjusted economic growth,” he said in a livestream discussion.
The changing demand for digital services, rising cost of production, and growing fears of a recession have prompted the tech giant to lower its headcount.
“We’re living through times of significant change, and as I meet with customers and partners, a few things are clear... First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less.” the CEO wrote in a memo to Microsoft employees.
The 10,000 employees account for less than 5% of Microsoft’s overall workforce, and some will find out later this week if they will keep their jobs. Severance pays, and other benefits like health care and stock vesting will be provided to eligible U.S. employees, as well as a 60 days notice. “These decisions are difficult but necessary,” Nadella explains.
Other major tech companies have also started reducing their headcount coming into 2023. Amazon announced that it plans to cut 18,000 jobs, which is more than it had initially set out. Salesforce is also reported to cut 10% off its employees, while Meta gears to make its biggest layoff in company history with 11,000 job cuts.