Microsoft said Monday that it’s offering buyouts to a wide swath of employees as it strives to balance a costly artificial intelligence infrastructure build-out with capital efficiency.
The software maker announced a new voluntary exit offer for certain workers in the U.S., Canada, India and the United Kingdom at its experience level of 70 or below.
Around 60,000 people are eligible, according to a person familiar with the matter, who asked not to be named while discussing an internal matter. The effort affects about 27% of Microsoft’s total workforce of 223,000 people.
Microsoft has been ramping up spending on data centers to accommodate high AI computing demand, supplying cloud services to Anthropic, OpenAI and a slew of other companies. Capital expenditures for the September quarter should exceed $50 billion, Microsoft said in July. In the same quarter a year ago, capital spending and finance leases came to $34.9 billion.
That’s put a strain on Microsoft’s finances. In April, it announced a first-ever voluntary retirement program that around 7% of U.S. employees were eligible for. Then, in July, Microsoft announced plans to lay off 4,800 employees.
“The Voluntary Exit Offer reflects an important part of how we’re evolving our approach to change: creating greater flexibility and, where possible, more ways for employees to shape their next chapter,” Amy Coleman, Microsoft’s executive vice president and chief people officer, wrote in a memo to employees. “This builds on what we learned earlier this year through the Voluntary Retirement Program.”
Microsoft is in the midst of a business model transformation, increasingly trying to charge clients based on how much AI they actually use. It has armed programmers, sellers and supply chain workers with AI tools and observed noticeable results. At the same time, the 51-year-old maker of Windows and Office wants to ensure that it has the right talent to go after its most compelling new growth opportunities.
The idea is to make the shift without weakening Microsoft’s financial profile. In the second quarter, cloud rivals Alphabet and Amazon both reported negative free cash flow, but Microsoft showed $19.64 billion in positive free cash flow for the period, down 23% year over year.
Some marketing, sales and engineering teams have decided not to participate in the new buyout, the person said. Employees must decide whether to take the offer in early December, and those participating will leave on Dec. 31, the person added.
More than 30% of those who could join the voluntary retirement program went ahead with it, Microsoft said in July. But that was open to those at the senior director level of 67 and below, while the new initiative goes higher, to the vice president level, said the person briefed on the new plan. The person said Microsoft does not have a target in mind this time around.
On Wednesday, Microsoft is scheduled to report third-quarter results.
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