While it is easy to point the finger at AI for Microsoft’s recent job cuts, a closer look at the company’s financials reveals a different story. Over the past decade, Microsoft’s capital expenditure on global infrastructure has grown at a faster rate than its revenue per employee. When inflation is considered, the revenue per employee has barely changed.
This suggests that the decision to trim staff is not driven by efficiency gains from AI, but rather by concerns over the rapidly expanding costs of its cloud infrastructure, especially in the face of an uncertain global economic outlook. Microsoft has recently reduced its infrastructure spending in the Asia-Pacific region, indicating that the growth rate of capital expenditure has become a significant concern for the board.
While there may be a small element of AI replacing roles, the broader economic trends and the immense cost of building and maintaining the infrastructure for both cloud and AI services are the far more significant factors at play. The recent staff cuts, which are equivalent to last year’s staff growth, could be a new baseline for the tech giant as it navigates these challenging economic currents.
Read the full story here.
