Microsoft trades 27% of staff for AI infrastructure

Microsoft announced on Monday that it is extending voluntary buyout offers to approximately 60,000 employees. This move affects roughly 27% of the company's total workforce of 223,000 people. The offer is available to staff in the United States, Canada, India, and the United Kingdom who are at experience level 70 or below.

The company is making this change to manage the financial strain caused by its rapid expansion in artificial intelligence. Microsoft has been increasing spending on data centers to meet high computing demand for clients such as Anthropic and OpenAI. Capital expenditures for the quarter ending in September are projected to exceed $50 billion, a sharp rise from the $34.9 billion spent in the same period last year.

This is not the first time Microsoft has used voluntary exit programs to adjust its headcount. In April, the company launched a voluntary retirement program that 7% of U.S. employees could access. Then, in July, it laid off 4,800 workers. More than 30% of eligible employees accepted the earlier retirement offer, according to data released in July.

Amy Coleman, Microsoft's executive vice president and chief people officer, explained the strategy in a memo to staff. She stated that the new offer creates greater flexibility and allows employees to shape their next chapter. Coleman noted that the company is learning from the previous retirement program to evolve its approach to change.

The new initiative reaches higher in the corporate hierarchy than the previous retirement program, which was limited to senior director level 67 and below. The current offer includes workers up to the vice president level. However, some marketing, sales, and engineering teams have opted out of the program. Microsoft has not set a specific target number for how many employees will take the deal.

Employees who accept the offer must decide by early December. Those who participate will depart the company on December 31. The company aims to maintain its financial strength while shifting its business model to charge clients based on actual AI usage.

Microsoft reported $19.64 billion in positive free cash flow in the second quarter, down 23% from the previous year. Cloud competitors Alphabet and Amazon both reported negative free cash flow during the same period. The company is scheduled to release its third-quarter financial results on Wednesday.