Microsoft has announced it will lay off 10,000 employees by the end of the third quarter, the latest sign of tech giants shrinking in the face of economic challenges.
The Redmond, Washington-based tech giant, in a memo to employees filed Wednesday with the Securities and Exchange Commission, said it would incur a $1.2B charge due to consolidation on its next earnings report. It cited lease consolidation and severance costs among the reasons for the loss, but didn't reveal how much real estate it would cut.
Microsoft CEO Satya Nadella cited the possibility of a recession and the rise of artificial intelligence as reasons for laying off roughly 5% of the company's workforce.
"These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts," Nadella said in a memo. "As such, we are taking a $1.2B charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces."
In comments at Davos, Switzerland, Wednesday, Nadella elaborated on Microsoft's new strategy, telling the World Economic Forum that demand is "normalizing" for the tech sector.
"We in the tech industry will have to get more efficient," Nadella said, according to The Wall Street Journal.
The changes follow news of Microsoft's shrinking footprint in multiple U.S. cities. The tech giant is exiting hundreds of thousands of square feet of office space in Washington, including a 585K SF space in East Bellevue and a 396K SF space in Issaquah, the Puget Sound Business Journal reported in October.
That follows a 2020 in which it signed some of the biggest office leases in the country, including a 400K SF office in Northern Virginia's Reston Town Center. Microsoft expanded its presence in the D.C. region the following year with a 180K SF lease in Rosslyn.
The new layoffs are the latest for a tech industry that has been in a state of contraction for months. Salesforce, Meta, Twitter and Amazon have all embarked on layoffs of their own, fueling the office sublease market in the process.
