Microsoft's mass layoffs come despite a streak of profitable quarters

Time of India

14-05-2025

Microsoft began laying off
about 6,000 workers, nearly 3%
of its entire workforce, on Tuesday, in its largest job cuts in more than two years. The mass layoffs come just weeks after the tech giant reported strong sales and profits that beat Wall Street expectations for the January-March quarter.
So, why is the Satya Nadella-led company firing thousands if its top and bottom lines are in good shape?
Details on the layoffs
Notices to employees began going out on Tuesday.
Hardest hit was the tech giant's home state of Washington, where Microsoft informed state officials it was cutting 1,985 workers tied to its Redmond headquarters
Many of the affected people were in software engineering and product management roles.
The layoffs will impact all levels, teams and geographies.
The cuts will focus on reducing the number of managers, as the company hopes to remove unnecessary layers.
Not the first time
After a smaller round of layoffs in January, this will be the tech giant's largest cuts since 2023, when it shed 10,000 jobs, or nearly 5% of its workforce, as part of a broader industry trend post-pandemic.
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Strong financials
Microsoft's results showed
unexpected strength in its business. Sales surpassed $70 billion, up 13% from the same period a year earlier. Profit rose to $25.8 billion, up 18%. The results far surpassed Wall Street's expectations.
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Microsoft said revenue at its Azure cloud division rose 33% in the third quarter ended March 31, exceeding estimates of 29.7%, according to financial research firm Visible Alpha, part of S&P Global. AI contributed 16 percentage points to the growth, up from 13 points in the previous quarter.
Rationale for the layoffs
Microsoft has been investing heavily in AI, upping its expenditure for 10 consecutive quarters. The company is shifting resources toward these high-growth areas, and therefore cutting staff.
The company is following other tech giants, including Meta and Amazon, which are also laying off scores of employees to optimise operations for long-term efficiency. This includes laying off middle management, automating tasks, and consolidating overlapping roles.
In 2025 alone, Google
has laid off about 200 employees
, Meta has
cut 3,600 jobs
or 5% of its workforce, and Apple has
laid off 100 employees
in its digital services arm.
DA Davidson analyst Gil Luria said the layoffs showed Microsoft was "very closely" managing the margin pressure created by its heightened AI investments.
"We believe that every year Microsoft invests at the current levels, it would need to reduce headcount by at least 10,000 in order to make up for the higher depreciation levels due to their capital expenditures," he said.