Dive Brief:
- Microsoft CFO Amy Hood said Wednesday the company expects its workforce to shrink further in the next fiscal year, underscoring a broader industry trend toward tighter headcount management amid rising artificial intelligence investment.
- Total Microsoft headcount declined year-over-year during the company’s fiscal 2026 third quarter ended March 31, as the software giant focuses on “building high-performing teams that operate with pace and agility,” Hood said during a Wednesday earnings call. She said the company expects the trend to continue, with headcount projected to further decline on a year-over-year basis in the next fiscal year.
- The company also disclosed about $900 million in one-time charges tied to a recently announced voluntary retirement program, expected to affect fourth-quarter operating expenses.
Dive Insight:
The tech industry announced 18,720 job cuts in March, more than any other sector, bringing its first-quarter 2026 totals to 52,050, a 40% increase from a year earlier, according to outplacement firm Challenger, Gray & Christmas. This marked the industry’s highest first-quarter total since 2023, when the sector recorded 102,391 cuts.
Microsoft did not disclose the scale or exact timing of its latest cuts, or business units affected. The company reported a total headcount of about 228,000 employees in June 2025, unchanged from the prior year.
Microsoft posted total revenues of $82.9 billion for the third quarter, up 18% year-over-year, driven by continued strength across its cloud and AI businesses. The company reported its AI business has reached a $37 billion annual revenue run rate, growing 123% year-over-year, while Azure cloud revenue rose 40%, reflecting sustained demand across AI and non-AI workloads.
The software giant is shrinking its workforce as it continues spending heavily on AI. “We are moving aggressively to add capacity aligned to our demand signals we see, and we've announced new data center investments across four continents,” CEO Satya Nadella told investors Wednesday.
Hood said the company expects its capital expenditures to exceed $40 billion in the current quarter “as we continue to bring more capacity online.”
A similar pattern is emerging across other major technology companies, where rising AI investment is being paired with tighter workforce management.
Meta Platforms ended its fiscal 2026 first quarter with over 77,900 employees, down 1% from Q4 “as the impact of headcount optimization efforts in certain functions was partially offset by hiring in priority areas of monetization and infrastructure,” CFO Susan Li said during a Wednesday earnings call.
Li said management had “shared internally” plans to reduce the size of its employee base in May.
“We believe a leaner operating model will allow us to move more quickly while also helping to offset the substantial investments we're making,” she said.
Total Meta expenses during the quarter were $33.4 billion, up 35% compared to the year-earlier period, due in part to employee compensation growth from technical hires added over the past year, particularly AI talent, Li said.
