Microsoft plans voluntary buyouts for 60,000 employees in AI restructuring

[Financial News]  

Microsoft (MS) announced plans for a large-scale restructuring on the 26th (local time). Employees in four countries—the United States, Canada, India and the United Kingdom—with an internal experience level of 70 or below will leave the company with outplacement programs, severance pay and other benefits. It appears that all employees up to the level just below senior executives are eligible.
CNBC reported, citing an anonymous source, that the total would reach about 60,000. That amounts to about 27% of the company’s 223,000 employees.
MS has embarked on this major restructuring to balance its massive investment in artificial intelligence (AI) with capital efficiency.
MS has invested heavily in data centers to meet demand for AI computing and cloud services from AI companies such as Anthropic and OpenAI. But it has yet to generate enough revenue to recoup those investments, leaving it under financial strain.
Last April, for the first time in its history, the company announced a voluntary retirement program for about 7% of its U.S. employees. In July, it announced plans to cut 4,800 jobs.
MS is in the midst of a business-model transition. While pursuing paid AI services to make its AI investments profitable, it is shedding staff it considers unnecessary and actively recruiting talent that could help it compete in AI.
This large-scale voluntary buyout is a painful measure to achieve that business-model transition without weakening MS’s financial position. In the second quarter, cloud competitors Amazon.com, Inc. and Alphabet Inc. each posted negative free cash flow (FCF), while MS recorded FCF of $19.64 billion, despite a 23% year-over-year decline. The buyout offer is, in effect, a way to maintain this financial advantage.
Meanwhile, MS is scheduled to release its third-quarter results after the market closes on the 28th. Its shares rose more than 1% that day amid the announcement of the large-scale restructuring.

[email protected] Song Kyung-jae Reporter