Microsoft cuts to 27% of staff to fund AI infrastructure

Microsoft is restructuring its workforce to manage the rising costs of its artificial intelligence expansion. On Monday, the company announced a voluntary exit program for specific employee levels across the United States, Canada, India, and the United Kingdom.

Approximately 60,000 employees are eligible for the offer, according to a person familiar with the matter. This group represents roughly 27% of Microsoft’s total workforce of 223,000 people. The program targets workers at experience level 70 and below, which includes the vice president level. Some marketing, sales, and engineering teams have opted out of the initiative.

The move addresses the financial strain caused by heavy investment in data centers. Microsoft is building infrastructure to handle computing demand for AI services provided to clients such as Anthropic and OpenAI. Capital expenditures for the September quarter are expected to exceed $50 billion. This figure is a sharp increase from the $34.9 billion spent in the same quarter last year.

Amy Coleman, executive vice president and chief people officer, stated the offer allows employees to shape their next chapter. She noted the program builds on lessons from a voluntary retirement plan launched in April. That earlier program was available to 7% of U.S. employees at the senior director level and below. More than 30% of eligible staff participated in that first effort.

Microsoft previously announced plans to lay off 4,800 employees in July. The company is also shifting its business model to charge clients based on AI usage. It has deployed AI tools for programmers, sales teams, and supply chain workers, citing noticeable results. The company aims to retain the right talent for new growth areas without weakening its financial position.

In the second quarter, Microsoft reported $19.64 billion in positive free cash flow. This amount is down 23% from the same period in the prior year. Rivals Alphabet and Amazon both reported negative free cash flow during that timeframe.

Employees must decide whether to accept the buyout offer by early December. Those who participate will leave the company on December 31. Microsoft is scheduled to report its third-quarter financial results on Wednesday.