'6000 employees': Microsoft replaces staff with AI they developed

Microsoft has recently laid off over 6,000 employees globally, which is around 3 per cent of its workforce, despite reporting a strong quarterly performance with $70.1 billion in revenue and in net profit, $25.8 billion.

Internal data suggests that software engineers bore the brunt of the cuts, and particularly those in Washington state were worst affected, where more than 40 per cent of those laid off were from engineering roles, according to Bloomberg.

Among the most affected by these layoffs were engineers who had been directed to adopt AI tools to boost productivity by their seniors. A report by The Information reveals that Jeff Hulse, a Microsoft vice president overseeing about 400 engineers, told his team to use OpenAI-powered systems to generate up to 50 per cent of their code. Weeks later, many from that same team were let go. The implication is clear, the very tools they were told to embrace may be the cause of their redundancy, and their replacement.

Microsoft CEO Satya Nadella has often been vocal about AI’s role in reshaping software development. He once, noted that in some cases, AI is now writing “nearly a third” of Microsoft’s code. While promoted as a step forward in productivity, the shift has sparked some serious concerns among the employees who see themselves being sidelined and replaced by the, very technology they worked tirelessly to develop.

The financial backdrop helps explain the decision. Microsoft has been committed around $80 billion to AI infrastructure, with the annual depreciation costs estimated between $15 to $20 billion. To maintain the confidence of investors in between the narrowing margins, the gross margins fell from 72 per cent to 69 per cent and this resulted in the company turning to workforce reduction.

Notably, high earners and experienced staff were the worst affected. Reports from the Blind forum indicate employees with total compensation exceeding over $600,000, including senior engineers and product managers who have given decades to the company, were disproportionately affected.

While Microsoft states the cuts were meant to streamline management, only 17 per cent of layoffs involved managers, aligning with the firm’s usual managerial ratio.