Microsoft extends exit offers to 27% of workforce to manage AI costs

Microsoft announced on Monday that it is extending a voluntary exit offer to approximately 60,000 employees. The company stated the move aims to balance the high costs of its artificial intelligence infrastructure buildout with capital efficiency. According to a person familiar with the matter, the initiative affects roughly 27% of Microsoft's total workforce of 223,000 people.

The offer is available to workers in the United States, Canada, India, and the United Kingdom who are at experience level 70 or below. This range includes roles up to the vice president level, a broader scope than the company's April voluntary retirement program, which was limited to senior directors at level 67 and below. Employees must decide whether to accept the offer by early December, with participants departing on December 31.

The timing of the exit offer follows a period of intense financial strain on the company. Microsoft reported in July that capital expenditures for the September quarter would exceed $50 billion, up from $34.9 billion in the same period a year earlier. The company is ramping up spending on data centers to meet high AI computing demand from clients such as Anthropic and OpenAI.

Amy Coleman, Microsoft's executive vice president and chief people officer, addressed the change in a memo to staff. She wrote that the offer reflects an evolving approach to change, aiming to create greater flexibility and more ways for employees to shape their next chapter. Coleman noted that the initiative builds on lessons learned from the earlier Voluntary Retirement Program.

Financial data from the second quarter illustrates the pressure on cash flow. While cloud rivals Alphabet and Amazon reported negative free cash flow, Microsoft maintained positive free cash flow of $19.64 billion. However, that figure represented a 23% decline year over year. Microsoft is attempting to manage this shift without weakening its financial profile while transforming its business model to charge clients based on actual AI usage.

The company has previously implemented workforce reductions, including a July plan to lay off 4,800 employees. More than 30% of eligible staff participated in the earlier retirement program. For the new exit offer, Microsoft does not have a specific target number of participants in mind, according to the person briefed on the plan.

Some marketing, sales, and engineering teams have opted out of the new buyout. Microsoft is scheduled to report its third-quarter financial results on Wednesday.