October Results, Nadella Hinted At Changes

The layoffs are not a surprise given Microsoft’s latest quarterly earnings report in October.

Microsoft Chief Financial Officer Amy Hood said at the time that the tech giant continued to see “deal moderation” in Microsoft 365 plans aimed at smaller businesses, which tend to be deals with partners attached.

“Where we in fact saw … new deal moderation – I referred to that, frankly, in Q4 as well – it tended to be in … the smaller end of the market, small to midsize companies,” Hood said at the time. “And it also tended to be through partner[s], which we had talked about before.”

The company reported demand for PCs also weakening.

Nadella himself gave some negative remarks on short-term growth – but remained optimistic on the tech sector in the long run – during an interview with CNBC earlier this month.

He said that while technology continues to grow in importance for industries such as construction, energy and manufacturing, it will still “have to go through our own cycles around productivity, absolutely, like anybody else.”

“The only reason why I would say ignore the short term is because in the long run we would be fine with demand – but in the short run, what we have to focus on is our own productivity,” he said.

Nadella called the next two years “the most challenging” for tech “because, after all, we did have a lot of acceleration during the pandemic and there is some amount of normalization of that demand.”

“On top of it, there is a real recession in large parts of the world,” he said. “And so the combination of pull forward and recession means we will have to adjust and that‘ll cycle through the demand cycle and in fact come out of it with what can be another massive growth cycle for the tech industry.”