Microsoft Corp. said it plans to cut 10,000 jobs, or about 5% of its workforce this year, taking steps to cope with an increasingly bleak outlook that has now bruised many of the technology industry’s biggest companies.
The company will take a $1.2 billion charge in the second quarter related to the move, which will shave 12 cents off of earnings per share, the company said in a corporate filing. The layoffs come as the software giant said it’s seeing customers exercise caution, with some parts of the world in recession and others heading toward one. Microsoft is scheduled to report results on Jan. 24. and is forecast to post its slowest revenue increase in six years.
Speaking earlier in the day before the cuts were announced, Chief Executive Officer Satya Nadella cautioned the industry is going through a period of slowdown and will need to adjust.
“During the pandemic there was rapid acceleration. I think we’re going to go through a phase today where there is some amount of normalization in demand,” Nadella said in an interview at the World Economic Forum in Davos, Switzerland. “We will have to do more with less — we will have to show our own productivity gains with our own technology.”
Microsoft said the charge will go to severance costs, “changes to our hardware portfolio” and the cost of consolidating real estate leases as the company creates higher density across its workspaces. In a blog post and email to employees, Nadella said that even as the company is eliminating roles in some areas it will continue to hire in “key strategic areas.”
When it reports earnings on Jan. 24, Microsoft is expected to post a second-quarter sales gain of 2%. That would be the slowest quarterly revenue increase since fiscal 2017. Microsoft’s cloud-computing products have fueled a resurgence in growth in the past decade, but even that business has begun to decelerate.
Analysts had been predicting that Microsoft, which has weathered past slowdowns without massive job cuts, would feel the pinch this year. On Tuesday the company was downgraded to sell from neutral at Guggenheim, the first bearish analyst rating on the software maker in more than three years.
Cloud rival and Seattle-area neighbor Amazon.com Inc. is set to begin a round of layoffs ultimately affecting more than 18,000 employees in the largest job cull in its history. Facebook parent Meta announced widespread job cuts last fall, and beleaguered social network Twitter Inc. has slashed about half its workforce. Corporate cloud-software maker Salesforce laid off about 10% of workers earlier this month.
Microsoft shares were little changed at $240.92 in New York on Wednesday morning.
