Microsoft is announcing big job cuts today, affecting 10,000 employees. In a memo, Microsoft CEO Satya Nadella says the company will be “making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3.”
Some employees will be notified today, but the entire 10,000 layoffs should be completed by the end of March. While Microsoft is making cuts, Nadella says the company “will continue to hire in key strategic areas.” Affected US employees will receive “above-market severance pay,” healthcare coverage for six months, continued vesting of stocks for six months, career transition services, and 60 days’ notice prior to termination.
Microsoft currently has more than 220,000 employees, and this latest round of layoffs affects around 5 percent of its workforce. These cuts are also significantly larger than the 1 percent cut Microsoft made to its workforce last year.
In Nadella’s memo, he also reveals the company is taking a $1.2 billion charge in its Q2 earnings that are due next week. The charge is “related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces.”
Microsoft is due to announce its fiscal 2023 second quarter earnings on January 25th, and the cuts and $1.2 billion charge clearly foreshadow some missed revenue targets in parts of Microsoft’s business. Microsoft ended its 2022 fiscal year with $198 billion in revenue and $83 billion in operating income — and with its Microsoft Cloud surpassing $100 billion in annualized revenue for the first time.
This round of cuts is one of Microsoft’s largest ever, topping the 5,800 reductions in 2009 and second to the 18,000 positions that were cut in 2014. But that 2014 reduction was shortly after Nadella had been appointed CEO and involved axing around 12,500 former Nokia employees.
Microsoft is the latest in a line of big tech companies to announce layoffs. Meta announced layoffs affecting 11,000 employees last year, and Amazon’s massive layoffs will affect 18,000 employees.
The job cuts at Microsoft come just days after the company implemented a new unlimited time off policy. Microsoft employees that have an unused vacation balance will get a one-time payout in April, and managers will be able to approve unlimited “Discretionary Time Off.” The policy has had a mixed reception internally at Microsoft, with some employees favoring the flexibility and others warning of a lack of guaranteed days and benefits.
The cuts also come just weeks after Nadella hinted that the software maker and other tech companies would face a challenging two years ahead. In an interview with CNBC, Nadella admitted Microsoft wasn’t “immune to the global changes” and spoke of the need for tech companies to be efficient.