Microsoft said in January 2023 that it would eliminate about 10,000 jobs through the end of its fiscal third quarter, citing economic conditions and customers’ efforts to optimize technology spending. Five days later, it announced an expanded, multiyear partnership with OpenAI. The timing raised an obvious question, but Microsoft’s announcements do not establish that AI caused the layoffs or that the cuts directly paid for the partnership.
What Microsoft announced
On January 18, 2023, Microsoft chairman and CEO Satya Nadella said the company would reduce its workforce by approximately 10,000 jobs through the end of FY2023 Q3, which ended March 31, 2023. The number represented less than 5% of the employee base. In its announcement, Nadella said roles would be eliminated in some areas while hiring continued in key strategic areas.
Microsoft’s SEC filing attributed the cuts to macroeconomic conditions and changing customer priorities. Nadella also described customers optimizing digital spending. The company’s FY2023 annual report later confirmed that approximately 10,000 jobs had been reduced through Q3.
Why layoffs and AI investment happened at the same time
On January 23, Microsoft announced a multiyear, multibillion-dollar extension of its partnership with OpenAI. The announcement described investment in AI supercomputing, Azure infrastructure and model deployment, but gave no precise investment amount.
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The announcements document two events close together: workforce reductions in response to economic conditions and customer spending priorities, and a strategic expansion of the OpenAI partnership. They do not say AI caused the layoffs, nor do they identify the job cuts as a source of funding for the partnership. Timing alone cannot establish that connection.
What the financial figures do—and do not—show
Microsoft’s FY2023 annual report provides context on the costs associated with the workforce changes. In Q2, the company recorded a $1.2 billion charge that included $800 million in severance, as well as hardware impairment and lease consolidation costs. The $1.2 billion figure was not all severance. Microsoft said the charge reduced diluted earnings per share by $0.12.
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Microsoft also reported $10.7 billion in FY2023 Q4 capital expenditure, including finance leases. That is a quarterly capital-expenditure figure; it is not a measure of layoff savings or the cost of the OpenAI partnership.
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What readers should take away
- Microsoft’s stated rationale for the January 2023 job cuts was the economic climate and changing customer priorities, including customers optimizing digital spending.
- The company announced its OpenAI partnership extension five days later, but its announcements do not establish a direct cause-and-funding link between the layoffs and AI investment.
- These figures describe events in 2023. They do not establish Microsoft’s current workforce size or current AI investment levels.
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