Microsoft’s latest round of layoffs has affected 9,000 employees, representing 4% of the company’s total workforce. According to The Seattle Times, this is all part of the company’s mandate to trim and make room for increased spending in AI infrastructure.
Microsoft’s AI Infrastructure Investment Strategy
The tech giant is cutting costs to accommodate its planned expenditures of over $80 billion in AI infrastructure, representing a massive $25 billion increase over the previous year. These investments are seen as more necessary than ever by Microsoft, especially given OpenAI’s evolving partnership dynamics.
While it’s not quite like replacing personnel with AI agents entirely, Microsoft is indeed prioritizing AI infrastructure over traditional workforce expansion.
Impact Across Microsoft Divisions
| Division | Impact | Details |
|---|---|---|
| Gaming | Heavy cuts | Project cancellations, studio closures |
| ZeniMax Online | MMO cancelled | Project Blackbird terminated |
| Tango Gameworks | Studio closed | Despite Hi-Fi Rush success |
| AI Infrastructure | $80B investment | $25B increase from previous year |
| Overall Workforce | 9K layoffs | 4% of total employees |
Gaming Division Bears the Brunt
The cuts are weighing heavily on Microsoft’s gaming reputation. Despite spending dozens of billions on gaming acquisitions like Bethesda parent company ZeniMax Media and Activision Blizzard, the Game Pass subscription service didn’t grow as expected.
Analysts are now saying that Xbox might have bet on the wrong horse, since subscriptions do not hold the same appeal for gamers as they do for music or TV/film fans.
Controversial Project Cancellations
The industry’s reaction has been particularly harsh following controversial decisions. Fourteen months after shutting down Tango Gameworks, which had released a successful and critically acclaimed game (Hi-Fi Rush), Microsoft cancelled a promising online looter shooter from ZeniMax Online Studios.
Former developers railed against the decision, saying that the project was finally heading in a great direction. Reports suggest even Microsoft Gaming CEO Phil Spencer had a blast while playing a vertical slice of Project Blackbird earlier this year, making the cancellation even more puzzling.
The AI Priority Shift
The only logical conclusion is that finishing Project Blackbird would have cost quite a bit, as it was just about to ramp up to production with an estimated late 2028 launch window. Microsoft clearly had other priorities – chiefly, bolstering its AI infrastructure.
For tech industry watchers following Microsoft’s strategic moves, this represents a significant pivot toward AI-first investments at the expense of traditional business units.
Stay updated on Microsoft’s developments through their official newsroom for the latest announcements.
FAQs
How many Microsoft employees were laid off in the latest round?
Microsoft laid off around 9,000 employees, affecting 4% of the company’s workforce.
How much is Microsoft investing in AI infrastructure?
Microsoft plans to spend over $80 billion on AI infrastructure, a $25 billion increase.
