Microsoft Lays Off 1,500 Workers in Its Azure and HoloLens Divisions, the Latest Casualty of its Alliance With OpenAI

  • With the reported layoffs, Microsoft is essentially leaving the HoloLens 2 team on the edge of death. The company’s strategy for Azure will also purportedly shift.

  • Microsoft’s efforts in developing corporate AI could affect its cloud development with 500 more layoffs.

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In mid-May, Microsoft unveiled its new generation of laptops to the public, highlighting Copilot+’s artificial intelligence capabilities. The launch also casually hinted at the new direction the entire company was planning to take.

Late Monday, The Verge reported that sources within Microsoft confirmed upcoming layoffs as part of a reorganization effort within the mixed reality divisions responsible for developing software for HoloLens 2 and Azure cloud services.

In 2023, Microsoft cut 10,000 jobs and continued with layoffs into 2024. The company, led by Satya Nadella, started 2023 by reducing its workforce by 5%. It proceeded to carry out more rounds of layoffs later that year, resulting in over 10,000 employees being let go. The rationale given then was the need to decrease operating costs and streamline the company’s structure, similar to the reasoning provided by Google and Meta for their layoffs.

However, Microsoft’s upcoming layoffs are expected to focus on reorganizing the departments in charge of developing the HoloLens 2. As reported by Business Insider, they’ll also impact the group of specialists working on Microsoft moonshots, a division that focuses on the development of quantum computing applications and space technology in Azure.

Microsoft’s strategic reorganization. Microsoft spokesman Craig Cincotta confirmed the news in a statement issued to The Verge: “Earlier today, we announced a restructuring of Microsoft’s Mixed Reality organization. We remain fully committed to the Department of Defense’s IVAS program and will continue to deliver cutting-edge technology to support our soldiers. In addition, we will continue to invest in W365 to reach the broader Mixed Reality hardware ecosystem. We will continue to sell HoloLens 2 while supporting existing HoloLens 2 customers and partners.”

Additionally, sources told CNBC that Microsoft’s mixed reality division would face significant cuts, impacting over 1,000 jobs. The Operators and Mission Engineering departments, responsible for innovation and development in Azure communication solutions and spatial data processing, would also see several hundred employees laid off. In total, approximately 1,500 layoffs are expected between these two divisions.

The long shadow of OpenAI. Microsoft’s latest product launch highlighted the strategic importance of its partnership with OpenAI in consumer devices, and what’s to come in future versions of Windows.

The shift aims to give AI a higher profile in enterprise settings, potentially pushing Microsoft’s cloud to the background. The focus seems to be on prioritizing the development of enterprise AI capabilities. In fact, Cincotta had this to say: “Organizational and workforce adjustments are a necessary and regular part of managing our business. We will continue to prioritize and invest in strategic growth areas for our future and in support of our customers and partners.”

Image | Valent Lau via Unsplash

Related | Microsoft Already Knows How to Conquer the AI World: Money. It’s Spent Nearly $30 Billion (So Far)

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