Microsoft Layoffs: What Does It Mean For CS Graduates? Indian Origin VC Explains

Microsoft Layoffs: Microsoft has initiated another round of layoffs, eliminating about 6,000 roles, or roughly 3% of its global workforce. These cuts span all levels, teams, and geographies.

In Washington state alone, 1,985 jobs were affected, including 1,510 office roles in Redmond, the company’s headquarters.

This is one of Microsoft’s largest reductions since its 2023 layoff of 10,000 employees. The company clarified that these new cuts are unrelated to individual performance.

Despite the downsizing, Microsoft’s financial health appears robust. In late April, the company reported $25.8 billion in net income for the quarter, beating analyst expectations, and gave an optimistic forecast.

In a statement to CNBC, a company spokesperson explained the rationale behind the layoffs, “We continue to implement organisational changes necessary to best position the company for success in a dynamic marketplace.”

A Broader Trend of Hiring Freeze

Microsoft's decision isn't an anomaly. Venture capitalist Deedy Das, of Menlo Ventures, pointed out that Microsoft, along with other tech giants, has essentially halted headcount growth since 2022. From 2012 to 2022, Microsoft expanded its workforce at an average annual rate of 10%, while Google grew at 14% annually. Since 2022, however, headcounts have remained largely flat.

Das emphasized that Big Tech hiring has hit a wall, “BigTech jobs have ZERO growth in the last 3yrs. Google, Microsoft, Apple, Tesla, Meta, Nvidia and Palantir—the biggest tech employers—have collectively stagnated headcount, data shows.”

Interestingly, this hiring freeze lines up with the launch of ChatGPT in 2022—though Das stops short of drawing a direct causal link.

Overhiring, AI, and High Rates

Das attributes this hiring plateau to a combination of pandemic-era overexpansion and post-pandemic corrections. Between 2020 and 2022, tech firms hired aggressively, buoyed by ultra-low interest rates and an explosion in demand for digital tools. But many consumer-facing products saw their growth peak during COVID, and have since stabilised or declined.

As interest rates climbed, CFOs across tech shifted their focus from headcount to margins. Simultaneously, Big Tech began pouring billions into AI infrastructure, particularly GPU-heavy data centres, which diverted capital away from hiring. The cost of capital has increased, and so have expectations for efficiency.

Additionally, Das suggests that AI itself is making companies more productive, reducing the need for traditional expansion in staff. He estimates that Microsoft's recent 7,000-person layoff will save the company around $1.4 billion annually, assuming an average cost of $200,000 per employee.

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What does it mean for CS Graduates?

The ripple effect is being felt in the talent pipeline. Das highlighted the growing struggle for new computer science graduates, “CS college graduates can’t find jobs anyway, and it’s getting worse.”

For over a decade, Big Tech served as a reliable landing pad for young engineers. Now, with flat headcounts and shrinking entry-level opportunities, even graduates from top schools are finding it difficult to break into the industry.

Is This the New Normal?

Das raises a fundamental question: do tech giants need to scale headcount in proportion to business growth anymore? Microsoft currently employs around 228,000 people. He asks, “Does Microsoft having 400k vs 200k people actually 2x the business?”

The current three-year hiring pause may have reshaped executive thinking. Companies might now believe they can grow earnings and impact by investing in AI and automation rather than in people.

“Maybe this 3yr cool off period makes execs realize: hey I can actually keep growing w/o hiring too (and say I ‘use AI’),” Das speculated.

For now, Big Tech appears to be leaning into this leaner, more efficient operating model. Whether this reflects a cyclical pause or a permanent transformation in how these firms scale remains an open—and critical—question for the tech labour market.