Microsoft gives 60,000 workers a paid way out to cover AI bills

Microsoft is expanding its workforce reduction strategy to address the heavy capital costs associated with its artificial intelligence infrastructure. The company announced on Monday a new voluntary exit offer for specific employees in the United States, Canada, India, and the United Kingdom. This initiative targets staff at experience level 70 and below.

Approximately 60,000 workers are eligible for the new program, representing about 27% of the company's total workforce of 223,000 people. This figure comes from a person familiar with the internal matter who requested anonymity. The move follows a series of cost management actions taken by the software giant throughout the year.

The financial pressure stems from a major increase in spending on data centers to meet high computing demand for AI services. Microsoft supplies these services to clients including Anthropic and OpenAI. Capital expenditures for the September quarter are projected to exceed $50 billion, up from $34.9 billion in the same quarter a year prior. This spending surge has strained the company's cash flow, leading to earlier cost-cutting measures.

In April, Microsoft introduced a first-ever voluntary retirement program that was open to about 7% of U.S. employees. Later in July, the company announced plans to lay off 4,800 staff members. Amy Coleman, Microsoft's executive vice president and chief people officer, stated in a memo that the new offer creates greater flexibility for employees to shape their next chapter. She noted that this builds on lessons learned from the earlier retirement program.

The company is currently shifting its business model to charge clients based on actual AI usage. It has deployed AI tools for programmers, sales teams, and supply chain workers, reporting noticeable results. Microsoft aims to align its talent structure with these new growth opportunities while maintaining financial stability. In the second quarter, the company reported $19.64 billion in positive free cash flow, a 23% decrease year over year, though it remained positive unlike rivals Alphabet and Amazon.

Some marketing, sales, and engineering teams have opted out of the new buyout program. Employees must decide whether to accept the offer by early December. Those who participate will officially leave the company on December 31. The new initiative extends the eligibility range higher than the previous retirement program, which was limited to the senior director level of 67. This new offer reaches the vice president level.

Microsoft has not set a specific target number for how many employees will take the deal. In July, the company reported that more than 30% of eligible staff participated in the earlier voluntary retirement program. Microsoft is scheduled to report its third-quarter financial results on Wednesday.