Microsoft is offering voluntary buyouts to approximately 60,000 employees, more than a quarter of its global workforce, as the technology giant seeks to contain costs while pursuing a projected $175 billion capital expenditure programme in 2026.
The move comes despite record annual profits, underscoring the financial pressures facing technology companies as they invest heavily in artificial intelligence infrastructure.
The programme, announced on October 26, covers eligible employees in the United States, Canada, India and the United Kingdom, including teams working on Copilot, Windows, Xbox, finance and human resources, Reuters reported.
Marketing, commercial business and security divisions are excluded.
Microsoft Chief People Officer Amy Coleman said the initiative would give eligible employees considering opportunities outside the company a supported route to leave, while allowing business units to adjust their workforce to changing needs.
The company has not disclosed how many employees will accept the offer or the total severance cost. The 60,000 figure represents eligible employees, not confirmed job losses.
Record Profits, Rising AI Costs
Microsoft reported fiscal 2026 revenue of $331.8 billion, up 18%, while net income rose 31% to $133.7 billion. Adjusted net income, excluding gains and losses related to OpenAI investments, increased 22%.
Microsoft Cloud revenue climbed 27% to $214.4 billion, supported by 41% growth in Azure and other cloud services.
Yet the expansion came at a cost. Microsoft Cloud’s gross margin declined to 66%, reflecting continued investment in AI infrastructure and growing demand for AI-powered products.
Within the Intelligent Cloud division, revenue increased 30%, while the cost of revenue rose 44%.
The figures highlight a widening challenge: strong demand for AI services is generating revenue, but delivering those services requires substantial investment in data centres, advanced chips and computing capacity.
Microsoft’s projected $175 billion in capital expenditure for calendar 2026 places further emphasis on cash generation and investment returns.
Workforce Savings Face an Investment Test
The latest initiative follows earlier voluntary buyout offers to approximately 9,000 US employees and the elimination of 4,800 positions in July as Microsoft restructured its Xbox business.
Voluntary departures could reduce recurring payroll costs, although severance payments create upfront expenses and the loss of experienced employees may carry longer-term operational risks.
Microsoft has not established that AI automation directly replaced the positions covered by the programme.
Meanwhile, the company’s commercial remaining performance obligations reached $678 billion in fiscal 2026, up 84%, indicating a substantial pipeline of contracted future revenue. Those commitments, however, do not guarantee future profitability.
Investors will scrutinise Microsoft’s October 28 earnings report for updates on Azure growth, AI infrastructure spending, margins and cash flow.
For Microsoft, the central question is no longer whether AI demand is growing, but whether that growth can generate returns sufficient to justify its rising cost.
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