Microsoft (MSFT) could cut thousands of jobs on Wednesday, according to multiple news reports, and could potentially become the latest tech company to cut its workforce as the global economy slows.
Sky News, without citing sources, reported that the layoffs would affect around 5% of the company’s workforce. Microsoft employs 221,000 people worldwide, including 122,000 in the United States.
The software company plans to cut jobs in a number of tech divisions, Bloomberg said. who cited a person familiar with the matter. The Wall Street Journal also quoted a person familiar with the matter as saying the layoffs could be announced as early as Wednesday. Microsoft declined to comment on the reports.
Speaking at the World Economic Forum (WEF) in Davos, Switzerland, Microsoft CEO Satya Nadella said Wednesday that the company is not immune to a weakening global economy.
“Nobody can defy gravity and gravity here is inflation-adjusted economic growth,” he told WEF founder Klaus Schwab in a livestreamed discussion.
Several tech companies have made significant headcount cuts since the start of the year as inflation weighs on consumer spending and rising interest rates put pressure on funding. Demand for digital services during the pandemic has also declined as people return to their offline lives.
Nadella said there would be a “normalization” of demand due to the rapid growth during the pandemic, which would require the tech industry to be more efficient.
“We will have to do more with less,” he added.
Amazon (AMZN) announced it plans to lay off 18,000 people and Salesforce said it will cut 10% of its workforce. Facebook (FB) parent company Meta also recently announced it was cutting 11,000 jobs, the largest in the company’s history. In October, Axios reported that Microsoft had laid off fewer than 1,000 employees across several divisions.
Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for hiring too many people early in the pandemic and misunderstanding how a surge in demand would cool their products once Covid-19 restrictions would be eased.
While the overall labor market remains tight, layoffs in the technology sector have increased at a staggering pace. A recent report from outplacement firm Challenger, Gray & Christmas found that layoffs in the technology sector increased by 649% in 2022 compared to the previous year, versus only a 13% increase in overall economy job losses over the same period .
Microsoft will announce its second quarter results on January 24. The software company’s Azure cloud computing business drove revenue growth for the three months through September, as sales in the personal computing division fell slightly.