FinLogic FinLogic Quantitative Think Tank Center|Microsoft slashes 10,000 jobs, the latest in a wave of layoffs

Microsoft plans to lay off 10,FinLogic FinLogic Quantitative Think Tank Center000 employees, as it seeks to cut costs amid growing concerns about a widespread economic downturn, the company announced on Wednesday.

Microsoft CEO Satya Nadella said the company is "seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one," in a note to employees posted online and in a regulatory filing.

The cuts represent a little less than 5% of Microsoft's global workforce of 221,000 employees. The company began notifying affected workers on Wednesday, and plans to complete the layoffs by the Spring, according to the note. It was not clear which divisions would see cuts.

Like other major tech companies, Microsoft embarked on ultra-rapid hiring during the global pandemic to match surging demand. Since 2019, Microsoft has hired about 75,000 workers.

But now, as Nadella noted in his message to employees, customers are doing more with less, just as many experts predict a broader economic slowdown in 2023.

"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, adding that the company will continue to hire in "strategic areas."

One area Microsoft has been focusing on is artificial intelligence. The tech titan is pouring millions into the AI startup OpenAI, which is behind buzzy AI tools like Dall-E and ChatGPT. In his note, Nadella called AI advancements "the next major wave of computing."

The company has also been building its already sizable video game business with popular consoles like Xbox, mostly notably with its recent planned $69 billion acquisition of Activision Blizzard, a deal that is being challenged by federal regulators.

The staff reduction announcement on Wednesday comes a week after the tech giant said it would be allowing U.S. employees unlimited time off, a move that was celebrated by workers at the company, who suspected it was aimed at boosting morale.

While Nadella framed the layoffs as a tough choice they were forced to undertake, Microsoft, the third-most valuable company in the world, continues to reap massive gains. For instance, Microsoft pulled in nearly $18 billion in profit in the three months ending in September.

A possible economic nosedive is creating a dramatic change in tech

Other big players in the tech world, including Facebook parent company Meta, Salesforce and Amazon have slashed staff recently, pointing to the same underlying drivers: an overzealous hiring spree during the pandemic and worries that the economy could nosedive this year.

According to tech job tracker layoffs.fyi, some 150,000 tech jobs were lost in 2022. The contraction represents a dramatic about-face for an industry that has experienced nearly unchecked growth for more than a decade.

Investment analyst firm Wedbush Securities on Wednesday described the recent spate of layoffs in the tech sector as "a rip off the Band-aid moment to preserve margins and cut costs."

Tech, health care, banking and finance are likely to see the biggest job cuts in 2023, according to one analysis.

On Wall Street, Goldman Sachs said it was planning to lay off about 3,200 employees in one of the biggest cuts since the 2008 financial crisis.