On Wednesday, CEO Satya Nadella informed Microsoft employees that the company would be postponing salary hikes for full-time staff.
This decision by Microsoft is consistent with their goal of cost reduction due to a decline in revenue growth and decreased client spending. In January, the company announced its plan to reduce its workforce by cutting 10,000 jobs, which is approximately 5% of its total staff. Other tech giants such as Alphabet, Amazon, and Meta have also implemented downsizing measures in recent months.
Amidst the inflationary impact on the economy last year, Microsoft had nearly doubled the budget allocated for merit-based increments and increased stock allocations for specific employees. However, this year, the company’s compensation structure is expected to return to normal.
In the email sent to employees, Nadella mentioned that Microsoft would be keeping its bonus and stock award budget intact this year. However, the overfunding that occurred in the previous year will be curtailed to align with the company’s typical averages. Microsoft has not yet responded to any requests for comments on this matter. As per reports by Insider, Nadella stated that the performance bonuses for top executives at Microsoft would be significantly lower than the previous year.
During April, Microsoft’s CFO Amy Hood had stated that the year-on-year revenue growth for the current quarter was expected to slow down to 6.7%, compared to 7.1% growth seen in the first three months of the year. The company also projected a growth rate of less than 2% in operating expenses, in contrast to the 7.4% increase observed in the first quarter. Along with the pay-related announcement, Nadella emphasized Microsoft’s focus on leveraging the expanding market for artificial intelligence.
Nadella wrote that Microsoft is leading a significant platform shift in the current AI era, amidst a challenging and competitive environment and the presence of global macroeconomic uncertainties.
Microsoft revealed a significant investment in OpenAI, a startup that uses Microsoft’s Azure cloud to operate its viral ChatGPT chatbot and supply large language models such as GPT-4 for applications used by both Microsoft and a range of other businesses, in January.
Last month, CFO Amy Hood stated that Microsoft’s capital expenditures would increase on a quarterly basis due to investment in Azure AI infrastructure.