Microsoft to lay off 10,000 jobs due to changing macroeconomics, CEO Satya Nadella says

Cut represents 4.5% of the US company's total workforce

Microsft's stock has dropped more than 20 per cent in the past year. AP

Microsoft is laying off 10,000 of its 221,000 employees to adjust to changing macroeconomics and to cut overall costs at the tech giant, amid a wave of industry layoffs.

The job cuts will affect about 4.5 per cent of the company's total employee base and will conclude by the end of March, Microsoft chairman and chief executive Satya Nadella said in a note to employees.

“We are making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of financial year 2023, Q3,” Mr Nadella said.

In a filing to the US Securities and Exchange Commission, the Washington state-based company said it is taking a series of actions in response to macroeconomic conditions and changing customer priorities.

“These actions include … changes to our hardware portfolio and lease consolidation to create higher density across our workspaces,” Microsoft said.

“Collectively, these actions will result in a charge of $1.2 billion in the second quarter of our 2023 fiscal year, representing a $0.12 negative impact to diluted earnings per share.”

Microsoft’s chairman and chief executive Satya Nadella. AFP

The company's stock, which has dropped more than 20 per cent in the past year, fell almost 0.75 per cent to trade at $238.56 a share on Wednesday. Its market value stood at $1.78 trillion.

In October, Microsoft reported a 14 per cent drop in net profit in the first quarter of its 2023 fiscal year, driven by softer cloud revenue than expected. Net profit was $17.6 billion in the three months to the end of September, about $2.9 billion less than the same period in 2021.

“As we saw customers accelerate their digital spend during the pandemic, we are now seeing them optimise their digital spend to do more with less,” Mr Nadella said.

“We are also seeing organisations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.”

However, Mr Nadella said he was confident Microsoft would emerge “stronger and more competitive”.

While the company is eliminating roles in some areas, it will continue to hire in key strategic areas, he said.

“We know this is a challenging time for each person impacted,” Mr Nadella said.

“The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”

He added that the company was working to align its cost structure with “our revenue and where we see customer demand”.

Microsoft is expected to announce its second-quarter earnings on January 24.

The world’s biggest e-commerce company, Amazon, announced this month it was laying off more than 18,000 workers, about 6 per cent of the workforce, as concerns about the US economy persist and fears of a global slowdown mount.

In November, Meta founder Mark Zuckerberg announced the company would lay off 11,000 staff, or 13 per cent of the total workforce, amid declining revenue.

PC maker Hewlett Packard said it would lay off as many as 6,000 employees over the next three years. HP, which has a payroll of about 61,000 people, said it aimed to secure $1.4 billion in annual savings through 2025.

Meanwhile, Twitter went through a tumultuous period last year in which half of its 7,500 employees were sacked a few days after the social media platform was taken over by billionaire Elon Musk in late October.

Apple in October paused hiring for most jobs outside of research and development, according to a report from Bloomberg.