Microsoft has announced job cuts impacting 10,000 employees — a little less than 5% of its workforce. The move is in response to macroeconomic conditions and changing customer priorities.

Microsoft CEO Satya Nadella announced the job cuts in a blog. The layoffs are taking place this quarter.

Microsoft’s Satya Nadella

“We’re living through times of significant change,” he said. “And as I meet with customers and partners, a few things are clear. First, 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. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one. At the same time, the next major wave of computing is being born with advances in artificial intelligence (AI), as we’re turning the world’s most advanced models into a new computing platform.”

Aligning Cost Structure with Revenue, Customer Demand

Microsoft is aligning its cost structure with its revenue and where it sees customer demand, Nadella said.

“It’s important to note that while we are eliminating roles in some areas, we will continue to hire in key strategic areas,” he said. “We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible.”

Microsoft will continue to invest in strategic areas for its future, “meaning we are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company, while divesting in other areas,” Nadella said.

“These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts,” he said. “As such, we are taking a $1.2 billion charge in Q2 (ending Dec. 31, 2022) related to severance costs, changes to our hardware portfolio and the cost of lease consolidation as we create higher density across our workspaces.”

Emerging Stronger

Microsoft‘s success “must be aligned to the world’s success,” Nadella said.

“That means every one of us and every team across the company must raise the bar and perform better than the competition to deliver meaningful innovation that customers, communities and countries can truly benefit from,” he said. “If we deliver on this, we will emerge stronger and thrive long into the future. It’s as simple as that.”

In October, Microsoft layoffs impacted close to 1,000 workers. That came as the software giant expected its fiscal first-quarter revenue growth to slow.