Microsoft is eliminating about 4,800 positions, roughly 2.1% of its global workforce. The latest round of layoffs affects sales, Xbox and other teams and comes as the company enters its new fiscal year.
According to Bloomberg, Microsoft is also moving some Excel and Outlook AI tasks away from OpenAI and Anthropic and onto its own MAI (Microsoft AI) models as part of efforts to lower costs tied to third-party services.
Why this matters
The company’s AI business is large — reports put its AI-related annual run rate at about $37 billion — but the infrastructure that powers these services is expensive. In the most recent quarter, capital expenditures (capex) reached $31.9 billion, and roughly two thirds of that spending was for GPUs and CPUs. High capex has put pressure on free cash flow, prompting cost-reduction moves.
Nature of the response
Both workforce reductions and replacing external models with in-house MAI models are aimed at shrinking the cost base. Bloomberg’s reporting frames these steps as attempts to protect projected net income for fiscal year 2027 from being eroded by rising AI infrastructure expenses.
What to watch next
- Whether shifting workloads to MAI models delivers meaningful cost savings in operations;
- how capex and free cash flow evolve in upcoming quarters;
- any further organizational changes and their effects on product development and customer-facing teams.
In short: Microsoft’s AI revenue scale is significant, but mounting hardware and operational costs have led the company to cut jobs and reallocate workloads to control expenses.
