Microsoft announced on Tuesday that it will lay off roughly 6,000 people, or 3% of its global headcount. With 228,000 employees as of last June, the cuts mark one of the largest rounds of Microsoft layoffs today since its 2023 reduction of 10,000 roles. Affected staff span all levels, teams, and locations.
Reasons for the Layoffs and Management Cuts
A Microsoft spokesperson told CNBC that these job cuts “help position the company for success in a dynamic marketplace.” One clear goal is to reduce layers of management and streamline decision-making. The company aims for a flatter structure, mirroring recent moves at Amazon and other tech giants to remove “unnecessary layers.”
- Headquarters Impact: Washington state filings show 1,985 roles will be cut at the Redmond campus, including 1,510 office-based positions.
- Not Performance-Based: Unlike January’s small, performance‑driven layoffs, these cuts are unrelated to individual performance.
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Performance Management Overhaul
Alongside the layoffs, Microsoft is changing how it handles underperformance:
- Two-Year Rehire Ban: Employees who exit for performance reasons cannot be rehired for two years.
- “Good Attrition” Metric: Similar to Amazon’s “unregretted attrition,” Microsoft will track departures it deems positive or necessary.
- PIP or Severance: Staff flagged for performance issues can choose a Performance Improvement Plan (PIP) or accept a “Global Voluntary Separation Agreement” with 16 weeks’ severance. Those opting for the PIP have only five days to decide and forfeit the severance if they stay on the improvement track.
These measures reflect a more assertive approach to ensuring all employees meet expectations.
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Industry Context and Financial Health
Microsoft reported strong Q3 results in April, with $25.8 billion in net income—better than analysts expected. Despite this, CEO Satya Nadella signaled the need for organizational tweaks after slower‑than‑anticipated growth in Azure cloud revenue outside of AI. He stressed the importance of aligning incentives and go‑to‑market strategies with the company’s shift toward artificial intelligence and platform innovation.
Microsoft shares closed at $449.26 on Monday, the highest price so far this year.
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Broader Tech Trends
Microsoft’s decision follows similar moves by industry peers:
- Amazon also cut roles earlier this year to remove excess management layers.
- CrowdStrike recently announced a 5% workforce reduction.
- Meta is planning thousands of cuts as it pursues a “year of efficiency.”
These shifts highlight a broader emphasis on leaner teams and higher engineering productivity across the tech sector.
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