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Microsoft lays off about 3% of its workforce in what one executive calls a “day with a lot of tears”
Microsoft (MSFT: NASDAQ)
- Revenue: USD$70.1 billion
- Net income: USD$25.8 billion and increased 18%
Microsoft began laying off about 6,000 workers Tuesday, nearly 3% of its entire workforce and its largest job cuts in more than two years as the company spends heavily on artificial intelligence. Hard hit was the tech giant’s home state of Washington, where Microsoft informed state officials it was cutting 1,985 workers tied to its Redmond headquarters, many of them in software engineering and product management roles.
Microsoft said the layoffs will be across all levels, teams and geographies but the cuts will focus on reducing the number of managers. Notices to employees began going out on Tuesday.
The mass layoffs come just weeks after Microsoft reported strong sales and profits that beat Wall Street expectations for the January-March quarter, which investors took as a dose of relief during a turbulent time for the tech sector and U.S. economy.
“I think many people have this conception of layoffs as something that struggling companies have to do to save themselves, which is one reason for layoffs but it’s not the only reason,” said Daniel Zhao, lead economist at workplace reviews site Glassdoor. “Big tech companies have trimmed their workforces as they rearrange their strategies and pull back from the more aggressive hiring that they did during the early post-pandemic years.”
Microsoft employed 228,000 full-time workers as of last June, the last time it reported its annual headcount. About 55% of those workers were in the U.S. Microsoft announced a smaller round of performance-based layoffs in January. But the 3% cuts will be Microsoft’s biggest since early 2023, when the company cut 10,000 workers, almost 5% of its workforce, joining other tech companies that were scaling back their pandemic-era expansions.
Microsoft’s chief financial officer, Amy Hood, said on an April earnings call that the company was focused on “building high-performing teams and increasing our agility by reducing layers with fewer managers.” She also said the headcount in March was 2% higher than a year earlier, and down slightly compared to the end of last year.
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The layoffs are hitting all parts of Microsoft’s business, including the video game platform Xbox and the career networking site LinkedIn. Some laid-off workers and the executives who made the cuts took to LinkedIn to talk about them.
“This is the first time I’ve had to lay people off to support business goals that aren’t my own,” wrote Scott Hanselman, a vice president of Microsoft’s developer community. “I often have trouble separating my beliefs with the system that I participate in and am complicit in. These are people with dreams and rent and I love them and I want them to be OK.” He added: “This is a day with a lot of tears.”
The company didn’t give a specific reason for the layoffs, only that they were part of “organizational changes necessary to best position the company for success in a dynamic marketplace.”
Microsoft has said it has been spending $80 billion in the fiscal year that ends in June on building data centers and other infrastructure it needs to develop its artificial intelligence technology, though it has also scaled back some of those projects. Those AI tools have been pitched as changing the way people work, including in Microsoft’s own workplaces.
Microsoft CEO Satya Nadella told Meta CEO Mark Zuckerberg at an AI event last month at Meta’s headquarters that “maybe 20, 30% of the code” for some of Microsoft’s coding projects “are probably all written by software.”
Even if AI is increasingly helping Microsoft software engineers, however, doesn’t necessarily mean it’s a chief reason for laying them off. “When these big tech companies say that they’re trimming management layers, that doesn’t really sound like it’s being driven by AI,” Zhao said. “You’re not expecting ChatGPT to replace the manager.”
Instead, cutting management ranks can often reflect a broader strategy. “As companies grow quickly, you need to add managers who can coordinate across teams or within teams,” Zhao said. “But it’s not until things start to slow down that people start asking questions about how necessary those roles are.”
Of the laid-off employees in Washington, about 1,500 worked in person at Microsoft’s offices and 475 worked remotely, according to the notice the company sent to the state employment agency. Their official last day will be in July.
After hiring sprees that started when the COVID-19 pandemic spiked demand for online services, many tech companies are still in a process of “coming back to Earth and trying to kind of rebalance some things,” said Cory Stahle, an economist at Indeed, the job listings website.
And while Microsoft isn’t as directly affected by President Donald Trump’s wide-ranging tariffs as some of its peers, it must also think more broadly about economic conditions that could play out over the coming months and years.
“This could be an effort to think more long term,” Stahle said. “If you have to go out and buy groceries and spend more on groceries and produce that are more expensive due to tariffs, you maybe don’t have as much discretionary income to spend on electronics or video game systems.”
Honda delays $15-billion EV project citing demand, shifts some CR-V output to U.S.
Honda (HMC: NYSE)
- Sales revenue: ¥21,688,767 million
Honda has postponed a $15-billion electric vehicle project in Ontario, citing market demand, and is shifting some production of its popular CR-V model intended for the U.S. market to its Ohio plant because of tariffs. The halted investment marks by far the biggest project delay yet in Canada as the outlook for EV growth softens.
In a quarterly earnings press conference on Tuesday in Japan, chief executive Toshihiro Mibe said the company will look at where the electric vehicle market is in two years before deciding whether to keep going with the project.
“What happens after two years and the starting time of the project, we have to observe what is happening and ultimately make the decision,” he said, based on translated remarks. While he cited EV demand for the delay, he said the company’s move to shift CR-V production to the U.S. is a more immediate result of tariffs.
“There is room to increase the production capacity in the United States, and we are trying to look into what will happen as a result of that,” said Mibe. “In the midterm, if the tariff measures are to be in place for a long time, then we will have to increase our production capacity in the United States.”
Honda was the second largest auto manufacturer in Canada last year based on the roughly 420,000 vehicles it produced, and the CR-V makes up close to half that total.
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But Honda Canada spokesman Ken Chiu said the company has no plans to cut overall production or jobs in Canada, and that the company is instead shifting which vehicles go where based on tariffs.
“We’re basically swapping export destinations of a small portion of CRVs between our plants,” he said by email. He said the decision to postpone the EV project, which would include a battery plant, a retooled assembly line, and two other plants, has no impact on the current 4,200 people who currently work at the Honda manufacturing plant in Alliston, Ont.
The decision comes even as EV sales do keep growing, and taking more market share. In Canada, zero-emission vehicles, which includes hybrids, made up 15.4% of sales last year, up from 10.7% a year earlier. Fully electric vehicles made up 11.4% of sales. In the U.S., EV sales were up 7.3% for 2024 from a year earlier and made up 8.1% of total sales, according to Cox Automotive. It expects one in every four vehicles sold this year will likely be electrified in some way.
But while growing, demand hasn’t matched some of the expectations that led to more than $46 billion in spending commitments in Canada since late 2020. The added costs and uncertainty of tariffs imposed by U.S. President Donald Trump, as well as his efforts to dismantle funding and support for EV adoption in the U.S., add to the challenges. Industry pressures have seen numerous automakers pull back on EV plans, even before Trump was elected.
Last year, Ford Motor Co. delayed production of an electric SUV at its Oakville, Ont., plant and Umicore said it had halted spending on a $2.8-billion battery materials plant in eastern Ontario.
The future of Northvolt’s battery project in Quebec is also unclear after the parent company declared bankruptcy in Sweden in March. And just last month, GM temporarily laid off hundreds of workers at its Ingersoll, Ont., plant that produces an electric delivery vehicle because it isn’t selling as well as it hoped.
Honda’s decision, affecting plans that were expected to create 1,000 jobs, came as it reported a drop in profits and more on the way because of tariffs. The company said Trump’s tariffs are expected to cut USD$4.4 billion from its operating profit for this fiscal year, largely because it has so many vehicles coming from Canada and Mexico into the U.S.
Ontario Premier Doug Ford said Honda assured him it’s still committed to the EV project.
“I’ve talked to Honda, they’ve promised us they’re going to continue on with their expansion,” said Ford at an event in Pickering, Ont. He said he was confident Prime Minister Mark Carney could reach a trade deal with Trump to create a mutually rewarding relationship that’s been growing since the first auto pact some sixty years ago.
The pullback in EV development shows the widening pressures of tariffs, said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association. He said Honda’s commitment last year had represented a massive vote of confidence in the Canadian supply base that he hopes it will see through. “We hope to find a solution for Canada that restores confidence for ambitious projects. All Canadian auto has benefited greatly for 40 years by Honda’s continued commitment,” said Volpe.
The project was first announced in April 2024 at an event that included then-prime minister Justin Trudeau and Ontario Premier Doug Ford and was to receive support from the federal and Ontario governments totalling about $5 billion.
While some EV projects have stumbled in Canada, other companies are pushing ahead. A joint venture between Stellantis and LG is nearing completion of a battery plant in Windsor, Ont., and Volkswagen’s PowerCo. is still building its big Gigafactory in St. Thomas, Ont., with initial production expected in 2027. The company notes though that once complete, the plant will follow a demand-based ramp up in commercial production.
CAE stands to grow with global upswing in military spending, CEO says
CAE Inc. (CAE: TSE)
- Revenue: $1.28 billion
