Both companies are cutting jobs from cloud businesses that are experiencing record growth, driven largely by AI. Despite this growth, there has been unprecedented spending on data centers and other infrastructure needed to support AI. Microsoft and Google have both indicated plans to spend billions more than anticipated on building and leasing new data centers. This has led to pressure from investors to demonstrate that these expensive shifts towards AI are not reckless spending sprees.
Key takeaways:
- Microsoft and Alphabet are laying off hundreds of employees in their cloud businesses, despite surging revenues in these segments. Microsoft is cutting up to 1,500 jobs in its Azure cloud division, while Alphabet cut at least 100 workers in its Google Cloud segment.
- The job cuts are a response to pressure from Wall Street to balance the high costs of new AI data center infrastructure with streamlined costs elsewhere in the business.
- Despite the layoffs, both Microsoft and Google are experiencing record growth in their cloud businesses, driven largely by demand for AI. Both companies plan to spend billions more than anticipated on building and leasing new data centers.
- Investors are pressuring tech firms to demonstrate that their massive capital expenditures on AI infrastructure are being at least partially offset by reduced costs elsewhere in the business, often resulting in job cuts.