Microsoft denies reports of 20% cloud cuts to offset AI spending

Microsoft is disputing claims that it plans to slash cloud division costs by 20% to offset its ballooning AI expenses, sources close to the matter told The Information. Microsoft Azure Core president Girish Bablani reportedly directed team leaders to devise cost-cutting measures, potentially involving layoffs of external contractors.

However, a Microsoft spokesperson dismissed the report as "inaccurate and careless," asserting Azure leadership did not mandate cost-cutting plans. The spokesperson added that responsible companies prepare for various market scenarios. Cloud computing infrastructure costs have surged with the AI boom, with Microsoft allocating $41 billion to data centers in its latest quarter, a 69% increase from the prior year.

Other tech giants like Amazon Web Services and Oracle have also trimmed staff to fund AI investments. Meta laid off over 10,000 employees this year in its AI pivot. Microsoft’s Azure reported $101.9 billion in revenue for the 12 months ending in June, a 40% year-over-year surge. Meanwhile, Microsoft restructured cloud leadership this week, consolidating oversight under Arun Ulag, who managed Azure’s database division.