Microsoft to lay off 6,000 employees despite strong financial performance

Key objective is to reduce management layers

Microsoft revealed on Tuesday that it is laying off approximately 6,000 employees, representing about 3% of its global workforce, despite strong finances.

The move impacts staff across all levels, teams and geographies and comes as part of a broader organisational restructuring aimed at streamlining operations and positioning the tech giant for long-term success.

"We continue to implement organizational changes necessary to best position the company for success in a dynamic marketplace," a Microsoft spokesperson told CNBC.

The layoffs are not performance-related, the company said, marking a departure from smaller performance-based cuts announced earlier in January.

The workforce reduction is the company's most significant since it eliminated 10,000 positions in 2023. Microsoft had 228,000 employees worldwide at the end of June 2024.

On Tuesday, the state of Washington disclosed that 1,985 of the affected roles are tied to Microsoft's Redmond headquarters, with 1,510 of those involving in-office positions.

Notably, the decision comes just weeks after Microsoft reported a robust $25.8 billion in quarterly net income and issued an upbeat forecast in late April, surprising analysts with better-than-expected results. Despite this strong financial footing, the company appears to be realigning its internal structure to remain agile in the face of industry shifts, particularly in the fast-moving AI and cloud computing sectors.

One key objective of the layoffs, according to Microsoft, is to reduce management layers, a strategy increasingly being adopted across the tech industry. In January, Amazon also cited "unnecessary layers" when it announced layoffs as part of its own restructuring initiative.

Just weeks prior to this announcement, on 30^th April, Microsoft chief financial officer Amy Hood hinted at a streamlining of the company's management structure.

"We continue to focus on building high-performing teams and increasing our agility by reducing layers with fewer managers," Hood stated.

More than a year ago, the company laid off 1,900 employees from Activision Blizzard and Xbox. This was followed in May 2024 by the closure of several game studios, including Tango Gameworks, the developer behind Hi-Fi Rush, and Arkane Austin, known for Redfall.

Around 1,000 employees from the company's HoloLens and Azure cloud teams were laid off in June.

Continuing this pattern, Microsoft cut approximately 650 Xbox employees in September 2024 as part of a restructuring effort related to the acquisition of Activision Blizzard.

The latest wave of job cuts aligns with the trend across the technology sector, where firms are adjusting headcount and internal structures to optimise efficiency, cutting out management layers and aiming to capitalise on emerging growth areas such as generative AI.

Just last week, cybersecurity firm CrowdStrike announced plans to lay off 5% of its workforce in a similar effort to adapt to changing business dynamics.

Microsoft CEO Satya Nadella foreshadowed such shifts during a January call with analysts, acknowledging the need for changes in sales execution.

The company had experienced slower-than-expected growth in Azure cloud revenue not associated with AI, while AI-driven cloud services exceeded internal expectations.

"How do you really tweak the incentives, go-to-market?" Nadella posed during the call.

"At a time of platform shifts, you kind of want to make sure you lean into even the new design wins, and you just don't keep doing the stuff that you did in the previous generation."

While the layoffs represent a significant adjustment, Microsoft has indicated its intention to continue investing heavily in AI and cloud innovation, areas it sees as critical if it is to maintain its leading position in marketplace.