Microsoft leads tech companies in layoff of workers amid significant investments in AI

Microsoft Corp. is making more cuts in addition to the 6,000 layoffs announced last month. This highlights the tech companies trimming costs even as they invest dollars into artificial intelligence.

A notice in Washington state revealed that more than 300 workers were informed yesterday that their positions had been eliminated.

Tech companies layoff workers amid significant investments in AI

The rise of AI has upended the tech job market, with companies doubling down on AI-related roles and deploying the technology to save money.

Microsoft and other firms, such as Meta Platforms Inc., have pointed to AI-backed coding tools as a way to accelerate software development. Last week, Salesforce Inc. said using AI internally has allowed them to require fewer employees.

Microsoft’s latest layoffs hit software engineers the hardest. This came after the job cuts that Microsoft Corp. announced on May 13 hit the people who built the company’s products. This was a sign that even software developers were at risk in the era of AI.

In the tech firm’s home state of Washington, software engineering was the biggest single job category to be issued with layoff notices, accounting for more than 40% of the roughly 2,000 positions cut.

Microsoft executives stated the reason behind the cuts. They said they wanted to limit spending due to large investments in the center’s construction.

Tech firms prioritize hiring in strategic areas such as AI

Aside from software engineers, many of those hardest hit at Microsoft were software project managers. Across the company, product management and technical program management roles accounted for almost 600 of the cuts in Washington, nearly 30% of the total.

The job cuts also included some managers and employees working on AI projects, according to a source familiar with the situation. 

Reliable sources suggest that few customer-facing jobs, such as sales and marketing, were the most affected. Microsoft did not respond to requests for comment.

Microsoft stated that the layoffs aimed to reduce layers of management. However, it remains unclear how much this restructuring was actually happening. Around 17% of the employees laid off in Washington were considered managers. 

At the end of 2023, the company had roughly the same percentage of managers across its workforce, based on a report submitted to the US Equal Employment Opportunity Commission. 

In addition to Microsoft, Salesforce Inc. planned to eliminate more than 1,000 jobs even though it hired AI-focused sales positions, including sales this year. CEO Marc Benioff said that the company also claimed to hire fewer engineers in 2025 due to using AI. 

Additionally, when Workday Inc. laid off staff in February, Chief Executive Officer Carl Eschenbach said hiring would continue in strategic areas such as AI.

Contrary to the cut and hiring on strategic areas trend, for software engineers, AI tools that can write or analyze code are now taking over parts of software development that engineers used to do by typing on keyboards. In April, Microsoft’s CEO Satya Nadella mentioned that AI is responsible for writing up to 30% of the code in some projects.