“One, we are still rebalancing employee counts from the over-hiring of the past decade,” said Hyoun Park, CEO and chief analyst of Amalgam Insights. “Tech companies were hiring with the assumption that they would grow at ridiculous rates that have not come to pass. Also, some tech companies think they can simply get rid of salespeople, especially in cash-cow industries where renewals seem to come in with little to no effort. Whether that is actually true or not, we are about to find out.”
The job cuts may also signal concerns about the near-term revenue potential of AI, Park said. While Microsoft is under pressure to invest heavily in AI to sustain its stock valuation, it may be turning to short-term operating expense reductions to support its financial performance.
“The planned $80 billion investment in AI infrastructure is especially interesting because those numbers assume a massive number of people will adopt Microsoft-related AI products,” Park said. “Are 50 million+ people willing to pay an additional amount on Microsoft products to support AI? That is a massive bet that has been completely unjustified by the current AI market today.”
Others point out that the company is betting on a long-term inflection in enterprise workload patterns driven by GenAI, but current adoption patterns remain volatile.
“Reports of Microsoft pausing or renegotiating data center leases reflect a prudent but necessary response to these uncertainties,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “If workloads fail to scale or regulatory barriers increase, Microsoft, and by extension, other hyperscalers, could face underutilized infrastructure, prompting pricing recalibrations or service tier stratification.”
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