Microsoft Layoffs Ahead Of Q2 Earnings: 5 Things To Know
Wade Tyler Millward
‘As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,’ Microsoft CEO Satya Nadella says.
Some Investors Remain Upbeat
A Morgan Stanley report published Wednesday said that the investment firm remained positive on Microsoft due in part to “alignment to key secular trends and benefits from vendor consolidation point to continued share gains, while tech, scale, & distribution advantages” – even if Azure growth comes in below the expected 37 percent year over year.
Helping Microsoft is a weaker U.S. dollar and a pullback in the price of energy in Europe. Microsoft reported in October $800 million in energy spending as cloud adoption grows.
Recently conducted Morgan Stanley surveys of chief information officers showed that “Microsoft should gain the most IT wallet share with the move to the cloud longer term.”
Microsoft was high on CIO priority lists and with the IT projects least likely to be cut, such as security software and cloud computing.
Azure ranked as the preferred public cloud vendor and is expected to remain so over the next three years, according to Morgan Stanley. Microsoft also remained the most preferred vendor for managing hybrid cloud environments.
Cloud as a whole is expected to keep growing, with 27 percent of workloads in the cloud expected to reach 46 percent by 2025.
A Wednesday report from Wedbush called the layoffs “not a surprising move as Nadella & Co. needed to cut sooner rather than later in non-strategic areas with a softer backdrop now on the horizon.”
The vendor had hired about 75,000 people since 2019 “to keep pace with eye-popping demand,” according to Wedbush. The layoffs will help Microsoft with investing in innovation while avoiding “non-strategic areas” such as hardware.
“This is a rip the band-aid off moment to preserve margins and cut costs in a softer macro, a strategy the Street will continue to applaud as management teams navigate this Category 5 near-term economic storm.”
A Wednesday report from KeyBanc put Microsoft in the lead for top public cloud vendors. The investment firm’s own recently done survey of IT professionals showed Microsoft to be a “top cloud, strategic SaaS, strategic security vendor, and overall” beneficiary of IT budgets.”