Microsoft invites 60,000 employees to consider voluntary redundancy amid record results

Microsoft has invited about 60,000 employees to consider voluntary redundancy by the end of the year, even as it reports record fiscal 2026 results. Azure is up over 40 percent, Copilot has 30 million paid seats, and the company returned $10.2 billion to shareholders. CEO Satya Nadella took a 6 percent pay cut, though his roughly 0.01 percent stake means he also shares in the cash return.

Record results and AI claims

Microsoft's Azure business is up over 40 percent, Copilot has 30 million paid seats, revenues are high, and the company returned $10.2 billion to shareholders through dividends and share repurchases. Nadella took a 6 percent cut in pay because of C-suite reimbursement and incentive packages, but as a stockholder with about 0.01 percent of the company he also receives a share of the cash return. The company can afford to keep all its employees, each of whom contributes about $1.5 million to its bottom line. Microsoft presents the "massive efficiencies and ROI of AI" as a selling point for its LLM services, but the evidence for those gains remains elusive.

Spending, capacity and debt

Analysts noted that capital expenditure was not as high as expected, with much of it pushed into the next calendar year. Microsoft added 88 datacenters in its most recent full financial year, which is not enough for a cloud business expected to grow by half again in 2027, nor for its other plans. Contracts have been signed, at substantial cost, to get things back on track quickly. Microsoft is hinting, according to those analysts, that it may have to use the debt market and enter negative free cash flow territory in 2028, taking out large loans as well as spending its own cash.

Why the redundancies are being offered

The cost of borrowing depends on the borrower's financial health, which comes down to profit from money earned. A large round of redundancies is costly in the year it happens, but the hole left by the vanished salaries remains. Reasons the plan might not work include price competition between rivals, increasingly powerful local and open weight models, and supply side shortages; new reports this week repeat the same themes.

Take-up and career uncertainty

On average only about 5 percent of those offered voluntary redundancy take it, a rate Microsoft's HR team will have factored in. The biggest knock-on effect is cultural, with mainly the most confident employees leaving and a disproportionate loss of talent and role models. Leavers receive career development resources, although it remains unclear what technical careers will look like if AI works and does all the work, if it fails and the global financial system suffers a severe shock, or anything in between.

Sources: The Register