As its cloud-computing clients review their spending as the firm prepares for a potential recession, Microsoft Corp (MSFT.O) announced on Wednesday that it would cut 10,000 positions and take a $1.2 billion impairment to earnings.
The cutbacks increase the tens of thousands of layoffs that have been announced recently in the technology sector, which has slowed down after experiencing rapid expansion during the pandemic.
The announcement comes as the software developer plans to increase investment in generative artificial intelligence, which the market views as the new growth area.
CEO Satya Nadella made an attempt to address the disparate outlook for various business segments in a note to employees.
Customers wanted to maximize their digital spending to get more done for less money while also being cautious given that some regions of the world are currently experiencing a recession and others are preparing for one, he said.
Less than 5% of Microsoft’s workers will be let go, according to Nadella, and notices will start to be sent out on Wednesday.
But he added that Microsoft would continue to hire in important positions. Most likely, one of those areas will be AI. This week, Nadella praised AI to world leaders gathered in Davos, Switzerland, saying the technology would change its offerings and have an impact on people all across the world.
Microsoft has considered increasing its $1 billion stock in OpenAI, the Silicon Valley business that created the crazed ChatGPT chatbot, which Microsoft intends to launch soon through its cloud service.
The price of the company’s shares in Redmond, Washington, decreased by 2% on Wednesday.
The statement coincides with the beginning of layoff notices at its retail and cloud computing rival Amazon.com Inc (AMZN.O), which began informing staff members of its own 18,000 job losses on Wednesday.
According to Amazon, affected employees in the US, Canada, and Costa Rica will be notified by day’s end. After the Chinese New Year, notification will be sent to employees in China.