Microsoft buyouts: 60,000 staff eligible as AI costs climb

Microsoft is offering voluntary buyouts to approximately 60,000 employees, a figure representing about 27% of its total workforce of 223,000 people. The company announced the move on Monday as it seeks to balance its massive artificial intelligence infrastructure build-out with capital efficiency.

The new voluntary exit offer targets workers in the United States, Canada, India, and the United Kingdom. Eligibility is limited to those at experience level 70 or below. A person familiar with the matter, who asked not to be named to discuss an internal issue, confirmed the headcount. This expands on a previous retirement program announced in April, which was available to about 7% of U.S. employees. Microsoft also laid off 4,800 employees in July.

The push for efficiency follows a sharp increase in spending to support high AI computing demand. Microsoft supplies cloud services to clients including Anthropic and OpenAI. Capital expenditures for the September quarter are expected to exceed $50 billion, up from $34.9 billion in the same quarter a year ago. This spending has strained the company's finances. While cloud rivals Alphabet and Amazon reported negative free cash flow in the second quarter, Microsoft posted $19.64 billion in positive free cash flow, a 23% year over year decline.

Amy Coleman, Microsoft's executive vice president and chief people officer, addressed the change in a memo to staff. She stated that the offer reflects an evolving approach to creating greater flexibility for employees to shape their next chapter. Coleman noted that the initiative builds on lessons learned from the earlier Voluntary Retirement Program.

The company is in the middle of transforming its business model to charge clients based on actual AI usage. Microsoft has equipped programmers, sales staff, and supply chain workers with AI tools and has observed noticeable results. The goal is to secure the right talent for new growth opportunities without weakening the financial profile. The new initiative reaches higher into the ranks than the previous program, extending to the vice president level rather than stopping at senior director level 67.

Some marketing, sales, and engineering teams have opted not to participate in the new buyout, according to the person familiar with the plan. Microsoft does not have a specific target number for this round. More than 30% of eligible employees joined the previous voluntary retirement program, the company reported in July.

Employees must decide whether to accept the offer in early December. Those who participate will leave the company on Dec. 31. Microsoft is scheduled to report its third-quarter results on Wednesday.