The latest cuts will primarily affect support, marketing, and related departments, following earlier layoffs that targeted software engineers.

Despite the layoffs, Microsoft's stock has remained stable, indicating a neutral market reaction, and it continues to be a high dividend stock.

However, risks loom if economic conditions worsen and AI investments do not yield expected returns, which could pressure stock prices and harm the company's reputation.

Microsoft is undergoing significant layoffs, announcing 7,000 job cuts in May 2023 and over 300 more in June 2023, despite substantial investments in artificial intelligence.

The impending job cuts could affect thousands of employees, highlighting ongoing challenges tech companies face in maintaining profitability.

The earnings report also revealed a notable growth in cloud services, with Microsoft Cloud revenue hitting $42.4 billion, up 20%, driven by strong demand for AI.

To bolster its market position, Microsoft is increasing investments in AI, focusing on integrating AI into its products like Microsoft 365 Copilot.

The company has earmarked $80 billion for capital expenditures in fiscal 2025, primarily for expanding AI-enabled data centers.

While the company has not confirmed a direct link between layoffs and AI efficiencies, reports suggest that AI may lead to smaller, more efficient teams across industries.

The layoffs are expected to significantly impact the sales departments, which had around 45,000 employees as of June 2024.

These layoffs reflect a broader trend in the tech industry, where companies are streamlining operations in response to changing market conditions.

Despite these layoffs, Microsoft reported strong financial performance, with Q3 FY25 revenue reaching $70.1 billion, a 13% increase year-over-year.