Microsoft confirmed today a global workforce reduction of 3%, impacting what reports suggest could be around 6,000 to 7,000 employees. This move affects staff across all levels and teams, including LinkedIn, according to a statement from the company. These cuts, a spokesperson explained to CNBC, are not performance-related but are part of efforts to “implement organizational changes necessary to best position the company for success in a dynamic marketplace.”
This significant restructuring, Microsoft’s largest since eliminating 10,000 positions in 2023, aims to streamline operations and notably includes reducing management layers. The decision arrives despite Microsoft reporting strong quarterly earnings and an upbeat financial forecast, in late April 2025. The current layoffs differ from around 2,000 performance-based job cuts earlier in 2025, which Microsoft attributed to removing underperforming staff.
During a company April 30 earnings call, Microsoft CFO Amy Hood emphasized the focus “on building high-performing teams and increasing our agility by reducing layers with fewer managers.” This aligns with earlier reports from April, suggesting the May layoffs would primarily target middle managers to increase managerial “span of control” and adjust the proportion of managers to engineers.
Strategic Shifts Amidst Strong Performance
Microsoft’s CEO, Satya Nadella, had previously signaled a need for strategic adjustments. In January, he discussed adapting incentives and go-to-market strategies during platform shifts, emphasizing the importance of leaning into new design wins, especially with emerging technologies like Artificial Intelligence, rather than merely continuing with past-generation approaches.
While Microsoft did not explicitly state if AI-driven efficiencies played a role in these specific cuts, the company’s broader strategy involves significant AI investment.
The company’s recent 2025 Work Trend Index report highlighted a global shift towards “Frontier Firms” that leverage AI. Dhanawat Suthumpun, Managing Director of Microsoft Thailand, noted that leading organizations are changing their work structures, with AI becoming “a new teammate for employees, who are now encouraged to work seamlessly with both their human and AI agent colleagues. These organizations are raising the bar for innovation and becoming ‘Frontier Firms’ with higher growth prospects than the competition.”
These workforce changes follow earlier policy tightening. In April 2025, Microsoft formalized its Performance Improvement Plan (PIP) process, offering underperformers a choice between an improvement plan or a voluntary separation package. At that time, Chief People Officer Amy Coleman said the goal was to address performance issues with clarity and empathy, aiming to foster a high-performing culture.
Broader Industry Pressures and Efficiency Drives
Microsoft’s restructuring is indicative of a wider trend across the technology sector, where major companies are continuously re-evaluating their workforce needs. Google, for example, recently trimmed around 200 jobs from its Global Business Organization to enhance collaboration and customer service. This followed Google’s more substantial 12,000-employee layoff in January 2023, 6% of Its global workforce at the time.
Meta Platforms has also been active in reshaping its teams. Earlier in 2025, Meta reduced its staff by approximately 5% through what it called “non-regrettable attrition,” with CEO Mark Zuckerberg stating an intent to “raise the bar on performance management and move out low-performers faster.”
These adjustments extended to its financially strained Reality Labs division. Simultaneously, Meta initiated an accelerated hiring program for AI engineers, underscoring the industry’s dual focus on cutting costs while heavily investing in AI talent.
Other tech giants like Intel are also navigating significant changes. Intel CEO Lip-Bu Tan announced a broad corporate reorganization in April 2025, including job cuts, to address financial pressures and what he described as a company culture that was “too slow, too complex and too set in [its] ways”. Cybersecurity firm CrowdStrike announced a 5% workforce reduction in early May 2025.
Impact and Ongoing Adjustments
The current layoffs at Microsoft are broader in scope than the performance-focused cuts at the beginning of the year. The company has not detailed which specific divisions are most affected, though IGN has inquired whether Microsoft’s video game business is impacted, noting previous significant cuts in that area since the Activision Blizzard acquisition.
Xbox boss Phil Spencer, in a June 2024 interview with IGN, touched on such challenges, stating, “I have to run a sustainable business inside the company and grow, and that means sometimes I have to make hard decisions that frankly are not decisions I love, but decisions that somebody needs to go make.”
This pattern of ongoing adjustments, even amidst profitability and strategic investments in areas like Azure cloud services and Copilot AI tools, highlights the dynamic nature of the tech industry.
Tech companies are striving to maintain agility, manage costs, and strategically allocate resources towards high-growth areas, particularly the capital-intensive field of artificial intelligence. The consistent theme is a drive for operational efficiency as Big Tech navigates a period of intense competition and technological transformation.
