Microsoft has officially confirmed its plan to lay off approximately 10,000 employees by the conclusion of the third fiscal quarter of 2023. This reduction represents less than 5% of the company's total workforce, which exceeds 220,000 individuals. Satya Nadella, Microsoft's CEO, stated that these changes are being implemented to align the company's cost structure with its revenue and customer demand, as well as to strategically allocate capital and talent towards areas of secular growth and long-term competitiveness.

Nadella emphasized the difficulty of these decisions, acknowledging their impact on employees' lives, but affirmed that the company remains committed to supporting those affected. Notifications for some layoffs began immediately, with affected employees receiving 60 days' notice before their termination. Microsoft has outlined comprehensive support packages for its US-benefit-eligible employees, which include above-market severance pay, six months of health insurance, career transition services, and continued vesting of stock awards for six months. For employees situated outside the US, benefits will be tailored to comply with the employment laws of their respective countries.

This is not Microsoft's first workforce reduction, as the company conducted a smaller round of layoffs impacting over 1,000 employees in the previous year. In addition to cost structure alignment, Microsoft is also looking to make changes to its hardware portfolio and consolidate leases to achieve higher density within its workspaces.

Microsoft's announcement contributes to a continuing trend of significant layoffs across the tech sector that began in 2022 and has extended into 2023. Other major tech companies have also announced substantial workforce reductions early in the year. Salesforce, for instance, revealed plans to lay off approximately 10% of its employees, equating to around 8,000 workers. Similarly, Venmo's CEO announced an 11% reduction in their team size, and Amazon disclosed a plan to cut 18,000 employees. Coinbase also reduced its workforce by 1,000 employees. With the economy still facing recessionary pressures, further layoffs across the tech industry remain a possibility throughout the year.