Microsoft’s Layoffs Signal AI’s Growing Role in Big Tech Jobs

By Douglas A. McIntyre Published May 25, 9:07AM EDT

Key Points

Microsoft (NASDAQ: MSFT) is leveraging AI to drive internal efficiency, with recent layoffs likely reflecting automation-driven workforce reductions rather than economic weakness.
Azure continues to outperform AWS in cloud growth, bolstered by Microsoft’s bundling of AI services as a value-added differentiator.
Analysts expect Microsoft to integrate AI deeply across its software and enterprise tools, enhancing long-term product stickiness and customer spend.
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Microsoft’s Layoffs Signal AI’s Growing Role in Big Tech Jobs — © 24/7 Wall St

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Transcript:

[00:00:04] Doug McIntyre: Yeah. Microsoft Lee, that it seems to be doing very well. Yeah, very well. But they laid off several thousand people a few days ago. Yep. And it’s always puzzling. now what they’ll always say, and I love this, is, is that these were the people who did do well on the employee evaluation. Okay? That that’s, that’s how we got,

[00:00:26] Lee Jackson: despite the fact they’ve been there for 20 years, but, okay.

[00:00:31] Doug McIntyre: it’s odd. It always makes me nervous when big companies start to lay people off. We did see the consumer confidence numbers today. They are horrible, horrible. Walmart said a couple days ago that they were gonna be hit by inflation, which means, so we’re gonna have to raise prices. That means discretionary income gets hit.

[00:00:51] Doug McIntyre: Whoa. No. That means that the things Microsoft sells get hit.

[00:00:56] Lee Jackson: Well, it’s interesting these big tech layoffs. Amazon (NASDAQ: AMZN | AMZN Price Prediction) laid off 20,000 people since like 21 or 22. So this is kind of systemic in the industry. And you’re right, it does make you wonder that, okay, do they go in and have big ideas that they’re gonna gonna need a ton of money and like they throw everything at it, and then if it doesn’t work right away, well it’s late.

[00:01:18] Lee Jackson: Let’s blow this up and, and, and move on. Or is it just their, their business is getting more reliable? And they don’t need all the people. I mean,

[00:01:28] Doug McIntyre: there’s another school of thought. the guy who’s the CEO of IBM, gave a speech four or five days ago, and he said that there were a number of people who worked at IBM that were going to be replaced by ai.

[00:01:42] Doug McIntyre: Now, he said they were gonna be hiring in some other jobs. So it’s like, well, we’re getting rid of some people, but we’re adding some people. But, AI, IBM is not a big AI champion. The CEO is, they’re a player though. They’re a player anyway. Player or not. They’re big enough and they have enough of a footprint in AI so that they’re telling the public and their shareholders that they’re replacing the people and functions with ai.

[00:02:13] Doug McIntyre: Now if you look at Microsoft, if IBM can do it, Microsoft can do it. You would certainly think so. I think a lot of the layoffs you’re gonna start to see in Big Tech right now or within the next year or two. Are not gonna be driven primarily by the economy, they’re gonna be driven by AI replacement.

[00:02:31] Lee Jackson: I think you’re a hundred percent right, because, low level engineers and people like that, boom.

[00:02:36] Lee Jackson: They can blow those out and do it all with AI. And it’s interesting, there’s a lot of applications that are being. Built now that are AI friendly, that were, that they’ll just absolutely will replace people. I mean, that’s no big long-term call on our part. Everybody knows that. But yeah, it’s interesting when we, if and when we find out exactly how AI is affecting, jobs at Big Tech.

[00:03:02] Doug McIntyre: Well, I would say that one of the reasons I find Microsoft, attractive. That you can make a strong argument that in the next two or three years, AI will be so advanced that a reasonably large part of the Microsoft workforce won’t exist anymore and it won’t have anything to do with performance.

[00:03:22] Doug McIntyre: Do with the fact that you can get rid of those people and you can keep Microsoft just as productive as it is today, if not more.

[00:03:30] Lee Jackson: Well, and there’s probably a way that Microsoft ultimately will intertwine. AI into, into their, their software systems, so it works with everything. And, and that will be something because how do you go to a new Windows, what’s the purpose?

[00:03:50] Lee Jackson: Unless they’ve interweaved AI into every part of it, the outlook and WordPress and everything like that. So maybe that’s part of their goal for their core product, and again, as you noted, because you really went through the earnings, Azure, continues, where AWS kind of hit a wall.

[00:04:11] Lee Jackson: Azure has continued to plow straight ahead.

[00:04:14] Doug McIntyre: If you look at cloud right now, the way that you keep cloud growing, if you are, Microsoft, Amazon, any of the Oracle is you combine it with AI applications.

[00:04:25] Doug McIntyre: You’re going to the customer and saying, look, we had cloud. It was really nice, but it was sort of a bit of an a, a, a commodity.

[00:04:34] Doug McIntyre: Now we’ve got a secret sauce. at this point Absolutely. Yeah. With us and you do your cloud work with us, we’re gonna give you all the secret sauce, ai secret sauce for free or for a low price, I, I think that I like Microsoft because of AI. Yeah, I like it as part of the mix for, for Azure, the cloud business.

[00:04:55] Doug McIntyre: And I like it as part of the, the mix within the company as an efficiency builder. Yeah. I mean, listen, a lot of code can be written by AI now, I. And that’s only going to get more prevalent.

[00:05:06] Lee Jackson: Well, and cloud computing ain’t going anywhere. It’s gonna be part of the lexicon for years and years and years to come until somebody, I guess, could come up with some other format.

[00:05:16] Lee Jackson: But yeah. And so the, the expansion of the uses, like you said, involved in multiple products could be huge.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.