Despite the increase in demand for Azure Cloud – thanks to growing investments in AI – Microsoft is getting ready to slash some 1,500 workers in the division. The news comes as a shock to the industry after the company recently made headlines about expanding Azure through a strategic partnership with OpenAI.

The cuts primarily affect the Azure for Operators and Mission Engineering teams, which specialise in space, telecommunications, and quantum computing initiatives, according to sources close to the matter.

Microsoft viewed the workforce reduction as part of its regular headcount adjustment. “Organisational and workforce adjustments are a necessary and regular part of managing our business. We will continue to prioritise and invest in strategic growth areas for our future and in support of our customers and partners,” a representative for Microsoft told Reuters.

Job cuts at Microsoft's mixed reality division

Microsoft will also be cutting some 1,000 other employees in its mixed reality division, particularly those working on the augmented reality headset HoloLens 2.

Despite the layoffs, the company promised to continue supporting existing customers and partners, such as the US Defense Department.

“We remain fully committed to the Department of Defense’s IVAS program and will continue to deliver cutting edge technology to support our soldiers,” the representative said.

The latest job cuts at Microsoft follow the sweeping changes introduced in January 2023, when CEO Satya Nadella said the company was downsizing the workforce by 10,000. He warned of the difficult two years ahead.