Microsoft Announces Further Mass Layoffs: Is the AI Revolution Slowing?

Microsoft has announced another round of layoffs, affecting approximately 9,000 employees, nearly 4% of its global workforce. This marks the second wave of job reductions in 2025, following earlier cuts in May (6,000 employees) and January (around 1% of the workforce). The layoffs span various departments, including sales, engineering, marketing, and gaming segments, as well as middle management. Officially, Microsoft attributes these decisions to the need to adapt its organizational structure to a dynamic market and to achieve strategic priorities, with artificial intelligence playing a key role.

Is the AI Transformation Too Costly?

The primary driver of these changes is a record investment in AI infrastructure, with Microsoft planning to allocate as much as $80 billion this fiscal year to expand data centers and develop AI-powered services. Such massive expenditures are intended to enable Microsoft to maintain its leadership position in the technological race but simultaneously exert pressure on the company's operating margins. Consequently, Microsoft is reorganizing resources, reducing the number of managers, and automating processes, partly through tools like Copilot.

The layoffs affect not only administrative and sales positions but also engineering teams, particularly those working on older technologies or projects unrelated to AI. A growing proportion of Microsoft's code is already being generated with the assistance of AI tools.

Does This Mean the AI Revolution Is Slowing Down?

Microsoft's actions do not necessarily signify a slowdown in the AI revolution, but rather a revolution brought about by these very tools.

• Investment growth continues, but companies—including Microsoft—are beginning to optimize the pace of infrastructure expansion, shifting from the costly stage of model training to more efficient practical implementation. Microsoft aims to avoid overpaying in the current revolution, should it prove to be smaller than currently anticipated.
• The pace of AI adoption in companies is decelerating; market data suggests that AI adoption among enterprises has already reached a high level, but the growth momentum has significantly slowed in recent quarters. Market leaders are experiencing stagnation, and new players are struggling to break through.
• Experts and industry leaders predict that the "easy" gains in AI are over; further development will require breakthrough innovations, not merely increased computing power or data access. Data resources are increasingly limited, and infrastructure costs are rising.

The era of easy AI victories has concluded. Progress will now be more challenging and demand deeper breakthroughs.

The company's shares have returned to yesterday's closing price but remain below their historical daily peak of $500 per share, which was reached on Monday at the end of June. Since the beginning of this year, Microsoft shares have gained over 16%, a level significantly higher than the Nasdaq 100, which has risen by just over 7%. Source: xStation5