Microsoft (MSFT) could announce thousands of job cuts on Wednesday, according to multiple news reports, potentially becoming the latest tech company to cull its workforce as the global economy slows.
Sky News, without naming sources, reported the layoffs would affect roughly 5% of the company’s workforce. Microsoft employs 221,000 people around the world, including 122,000 in the United States.
The software company plans to cut jobs in a number of engineering divisions, according to Bloomberg, which cited a person familiar with the matter. The Wall Street Journal, also citing a person familiar with the matter, said the layoffs could be announced as soon as Wednesday. Microsoft declined to comment on the reports.
Speaking at the World Economic Forum (WEF) in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella said that the company was not immune to a weaker global economy.
“No one can defy gravity and gravity here is inflation-adjusted economic growth,” he told WEF founder Klaus Schwab in a livestreamed discussion.
Multiple tech companies have made deep cuts to their workforces since the start of the year, as inflation weighs on consumer spending and rising interest rates squeeze funding. The demand for digital services during the pandemic has also waned as people return to their offline lives.
Nadella said that there would be a “normalization” of demand following rapid growth during the pandemic, which would require the tech industry to be more efficient.
“We will have to do more with less,” he added.
Amazon (AMZN) announced that it plans to lay off 18,000 people and Salesforce said it is cutting 10% of its staff. Facebook (FB) parent Meta also recently announced 11,000 job cuts, the largest in the company’s history. In October, Axios reported that Microsoft had laid off under 1,000 employees across several divisions.
Tech CEOs, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed themselves for over-hiring early on in the pandemic and misreading how a surge in demand for their products would cool once Covid-19 restrictions eased.
While the overall labor market remains tight, layoffs in the tech sector have mounted at a staggering pace. A recent report from outplacement firm Challenger, Gray & Christmas found tech layoffs were up 649% in 2022 compared to the previous year, versus just a 13% uptick in job cuts in the overall economy during the same period.
Microsoft will announce second quarter earnings on January 24. The software company’s Azure cloud computing business drove revenue growth over the three months through September, as sales in its personal computing division decreased slightly.