Microsoft Layoffs Target Developers as AI Spending Soars

• Microsoft Corp. (MSFT) cut approximately 6,000 jobs globally, with over 40% of the 2,000 layoffs in Washington state targeting software engineers.
• AI-driven automation, generating up to 30% of code in some projects, is reducing the need for engineers, while product and technical program management roles accounted for nearly 600 cuts in Washington.
• The layoffs, which spared most customer-facing roles and affected 17% of managers, reflect Microsoft’s cost-cutting efforts amid heavy AI infrastructure investments, mirroring trends at firms like Salesforce Inc. (CRM) and Workday Inc. (WDAY).

The rapid integration of artificial intelligence is reshaping the workforce at Microsoft Corp. (MSFT), with recent layoffs disproportionately affecting software developers and project managers, according to state documents reviewed by Bloomberg. In Washington state, where Microsoft is headquartered, software engineering roles accounted for over 40% of the approximately 2,000 positions eliminated, highlighting the vulnerability of even highly skilled technical roles in the AI era. The company announced a broader reduction of about 6,000 jobs across its global operations, a move driven by cost scrutiny as Microsoft invests heavily in AI infrastructure, including data center construction.

The layoffs reflect a broader trend across the technology sector, where companies are reallocating resources to prioritize AI development while leveraging AI tools to automate tasks traditionally performed by human workers. At Microsoft, Chief Executive Officer Satya Nadella revealed in April that up to 30% of code in some projects is now generated by AI, reducing the demand for manual coding by engineers. This shift is not unique to Microsoft; other tech firms are undergoing similar transformations. For instance, Salesforce Inc. (CRM) announced plans to cut over 1,000 employees earlier this year while hiring for AI-focused sales roles, with CEO Marc Benioff noting a reduced need for engineers in 2025 due to AI advancements. Similarly, Workday Inc. (WDAY) disclosed layoffs in February while emphasizing hiring in strategic areas like AI, according to CEO Carl Eschenbach.

Beyond software engineers, Microsoft’s cuts in Washington heavily impacted product management and technical program management roles, which together comprised nearly 600 of the state’s reductions, or about 30% of the total. Even some employees working on AI projects were affected, according to an insider familiar with the layoffs, suggesting that no role is entirely immune as the company streamlines its operations. Notably, only about 17% of the eliminated positions in Washington were managerial, aligning closely with the company’s overall managerial composition at the end of 2023, as reported to the US Equal Employment Opportunity Commission. This raises questions about the extent to which Microsoft’s stated goal of reducing management layers is being achieved.

Customer-facing roles, such as sales and marketing, were largely spared, indicating a strategic focus on maintaining client relationships while optimizing internal operations. Microsoft’s leadership has emphasized fiscal discipline amid significant AI investments, with executives pledging to control spending. The layoffs underscore the dual pressures of advancing cutting-edge technology and maintaining profitability in a competitive landscape. As AI continues to automate complex tasks, the tech industry faces an ongoing challenge: balancing innovation with the human cost of workforce restructuring. While Microsoft declined to comment to Bloomberg on the specifics of the layoffs, the data paint a clear picture of a company navigating the transformative impact of AI on its core operations.

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