Microsoft prepares major job cuts targeting sales amid AI investments

Microsoft is set to announce new wave of job cuts, targeting sales teams. (Photo: Tada Images/Shutterstock)

Microsoft is preparing for another significant round of job cuts, targeting thousands of roles, primarily in sales. This move comes as the tech giant continues to adjust its workforce amidst substantial investments in AI, according to reporting by Bloomberg. An announcement in this regard anticipated to be made in early July, coinciding with the conclusion of Redmond’s fiscal year.

Although primarily affecting sales teams, the layoffs will not be limited to this area alone. Microsoft has not commented publicly on the matter. The timing of the cuts remains subject to change, according to sources cited by Bloomberg who requested anonymity. These impending job reductions follow a prior wave of layoffs in May that impacted 6,000 employees, focusing mainly on product and engineering positions.

In recent months, Microsoft has indicated plans to rely on third-party providers for more software sales, particularly targeting small and mid-size businesses. Earlier this year, additional layoffs were announced, which were attributed to performance issues and involved less than 1% of the workforce. Earlier layoffs involved nearly 2,000 job cuts in the gaming division after the acquisition of Activision Blizzard and around 1,000 positions in the Azure cloud unit as part of wider cost-management efforts.

Redmond has been constantly evaluating its organisational structure to align with growth objectives. While investing heavily in servers and data centres, Microsoft’s leadership has assured Wall Street and informed employees that spending in other areas will be restrained. At the close of June 2024, Microsoft employed 228,000 people, with 45,000 working in sales and marketing.

Complex negotiations with OpenAI over future partnership terms

In a separate development, Microsoft is reportedly set to walk away from its ongoing talks with ChatGPT developer OpenAI regarding their multibillion-dollar partnership. According to sources cited by the Financial Times, these talks could end if key terms are not agreed upon. Central to these discussions is OpenAI’s transition from a non-profit to a for-profit entity, a move that requires Microsoft’s approval and may lead to an initial public offering (IPO) for OpenAI.

To date, Microsoft has injected over $13bn in OpenAI and is negotiating its stake in the restructured company, with options ranging from 20% to 49%. Should an agreement not be reached, Microsoft intends to count on its existing contract until 2030.

Negotiations also involve revising their existing commercial agreement from 2019, which provides Microsoft with exclusive rights to distribute OpenAI’s models and a significant portion of revenues up to $92bn. There are also concerns about the future AI infrastructure and computing resources management.

Additionally, reports had surfaced earlier this week that OpenAI executives are contemplating petitioning the US government for a regulatory review of the firm’s contract with Microsoft. This move by OpenAI stems from apprehensions about potential antitrust law violations by Microsoft.

Read more: OpenAI contemplates antitrust review of Microsoft’s partnership terms