Microsoft has confirmed it will implement a small percentage of job cuts across various departments, affecting less than 1% of its workforce. The decision, communicated in an email to CNBC, stems from performance evaluations rather than a broader restructuring initiative.
The technology giant, which employed approximately 228,000 individuals at the end of June, stated that the cuts are necessary to maintain high standards of performance within the company. A Microsoft spokesperson emphasized the importance of talent quality, stating, "At Microsoft we focus on high-performance talent." They further added, "When people are not performing, we take the appropriate action."
These job reductions come on the heels of previous layoffs. Earlier in January 2024, Microsoft eliminated 1,900 positions to streamline its gaming unit following a merger. In early 2023, the company laid off 10,000 employees as part of a broader strategy to consolidate operations and reduce redundancies.
Importantly, these latest job cuts are not connected to Microsoft's recent acquisition of Activision Blizzard, underscoring that the changes are driven by internal performance metrics rather than external market pressures or transitions.
Despite these layoffs, Microsoft's overall business outlook remains positive. The company has reported a net income margin nearing 38%, its highest level since the early 2000s. Although Microsoft's stock underperformed last year—rising only 12% compared to the Nasdaq's 29% gain—the company continues to pursue growth opportunities. Its Azure cloud service is expected to see accelerated revenue growth in the first half of this year, attributed to increased AI infrastructure capacity.
The integration of AI technologies into Microsoft's products is ongoing, with innovations such as the Microsoft 365 Copilot assistant, which utilizes OpenAI technology. However, this tool has yet to achieve widespread adoption in business environments.
Microsoft's robust partnership with OpenAI significantly contributed to its market capitalization exceeding $3 trillion last year, signaling investor confidence in its future potential despite the current job cuts.
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