Microsoft layoffs hit coders hardest with AI costs on the rise

Microsoft Corp.’s recently announced job cuts fell hardest on the people who build the company’s products, showing that even software developers are at risk in the age of artificial intelligence.

In Microsoft’s home state of Washington, software engineering was by far the largest single job category to receive layoff notices, making up more than 40% of the roughly 2,000 positions cut, according to state documents reviewed by Bloomberg.

Microsoft on Tuesday said it would cut about 6,000 workers across the company. The Washington state data represents about a third of the total.

As Microsoft and its rivals make steep investments in AI, they are scrutinising costs and reprioritising budgets. In recent weeks, Microsoft executives have pledged to keep a lid on spending amid huge investments in data centre construction.

At the same time, AI-powered tools capable of writing or analysing code are automating elements of software development previously done by engineers typing away on keyboards. At Microsoft, as much as 30% of some projects’ code is now written by AI, Chief Executive Officer Satya Nadella said in April.

Also Read: Microsoft’s mass layoffs come despite a streak of profitable quarters

Several tech companies are reshaping their workforces as they focus on AI. Earlier this year, Salesforce Inc. planned to cut over 1,000 employees as it hired for AI-focused sales roles, particularly in sales. CEO Marc Benioff also said the company will reduce its hiring of engineers in 2025 due to the use of AI. When Workday Inc. announced a layoff in February, CEO Carl Eschenbach said hiring would continue in strategic areas like AI.


Beyond software engineers, many of the hardest-hit Microsoft personnel ran software projects. Product management and technical program management roles together made up almost 600 of the reductions in Washington, or about 30% of the total.

The job cuts also targeted some managers and workers assigned to AI projects, according to a person familiar with the cuts.

Relatively few customer-facing roles, such as sales or marketing, were impacted, the data show. Microsoft declined to comment.

Microsoft said the layoffs were designed to remove layers of management. But it’s not clear how much delayering is actually going on. About 17% of those axed in Washington were classified as managers. The company employed about the same percentage of managers across its entire operation at the end of 2023, according to a workforce report filed with the US Equal Employment Opportunity Commission.