Microsoft Cuts 27% of Staff to Fund AI Buildout

Microsoft is extending a voluntary exit offer to approximately 60,000 employees, a move that affects 27% of its total workforce. The company announced the plan on Monday to balance its massive spending on artificial intelligence infrastructure with capital efficiency. The offer is available to specific workers in the U.S., Canada, India, and the United Kingdom. Eligibility is limited to staff at experience level 70 or below.

The company's capital expenditures for the September quarter are expected to exceed $50 billion. This figure marks a sharp increase from the same period a year earlier, when capital spending and finance leases totaled $34.9 billion. Microsoft is ramping up data center construction to meet high computing demand from AI clients such as Anthropic and OpenAI. This surge in spending has placed pressure on the company's financial profile. In the second quarter, Microsoft reported positive free cash flow of $19.64 billion, a 23% decline from the previous year.

This initiative follows other recent personnel changes at the tech giant. In April, Microsoft launched its first voluntary retirement program, which was eligible for about 7% of U.S. employees. That program included staff at the senior director level of 67 and below. More than 30% of eligible workers accepted that earlier offer. The new buyout plan extends eligibility to the vice president level. In July, the company also announced plans to lay off 4,800 employees. A person familiar with the matter stated that Microsoft does not have a specific target number for participants in this new round.

Amy Coleman, Microsoft's executive vice president and chief people officer, addressed the decision in a memo to employees. She described the move as a way to create greater flexibility for staff to shape their next chapters. Coleman noted that the new offer builds on lessons learned from the earlier retirement program. The company is currently transforming its business model to charge clients based on actual AI usage. It has equipped programmers, sales staff, and supply chain workers with AI tools and observed noticeable results from this shift.

Some marketing, sales, and engineering teams have opted out of the new buyout. Employees must decide whether to accept the offer in early December. Those who participate will leave the company on Dec. 31. Microsoft is scheduled to report its third-quarter financial results on Wednesday. The company aims to make this structural shift without weakening its financial standing, despite competitors like Alphabet and Amazon reporting negative free cash flow in the second quarter.