The news: Microsoft is cutting 3% of its workforce, or between 6,000 and 7,000 employees.

As the Windows company flattens its management tier, a trend across the tech industry, middle managers will be most affected. Divisions including LinkedIn, Xbox, and software engineering will lose workers.

It’s Microsoft’s biggest job cut since it laid off 10,000 people in January 2023.

The trend: So far this year, 127 tech companies have laid off more than 59,000 people, per Layoffs.fyi. In 2024, that number surpassed 152,000.

• The bulk of that number comes from Intel, which announced it would cut 22,000 employees in April, per Fast Company, to “flatten the organization” and focus on engineering. It already cut 15,000 workers in August 2024.
• Match Group, parent company of Tinder, Hinge, Match, and OurTime, will cut 13%, or about 325 employees. Like Microsoft and Intel, its focus is on reducing management tiers.
• Meta cut 3,000 workers in February, with a focus on low performers. However, several of those affected said they were exceeding expectations in reviews, per Yahoo.
• CrowdStrike and Chegg attributed layoffs of 500 and 248 employees, respectively, to AI efficiencies.

Microsoft at a crossroads: The layoffs, in spite of better-than-expected quarterly revenues, are likely part of a much larger restructuring at Microsoft.

• Last month, it canceled a $1 billion plan to build data centers in Ohio. It also paused development at several other sites around the globe.
• Microsoft’s revenues from OpenAI may be cut in half as the latter transitions to a public benefit corporation.

It’s not alone in infrastructure cuts. China built over 500 data centers in 2023 and 2024, and 80% of those are unused, per MIT Technology Review. That was before less-expensive models like DeepSeek hit the market and negated the need for heavy compute power.

Our take: Microsoft is cutting budget items across the board to keep profits up and investors happy as OpenAI breaks away. While this could be a sign of a pending AI bust, similar to the dot-com bubble and bust at the turn of the century, it’s more likely a course correction as Microsoft condenses its staff and data center footprint to match AI’s evolution.