Satya Nadella, CEO of Microsoft, disclosed in a recent email to employees that the company will postpone salary increases for full-time staff, according to CNBC. This decision mirrors Microsoft’s ongoing cost-cutting measures in response to decelerating revenue growth and reduced client spending.
Earlier this year, the tech giant announced plans to eliminate around 5% of its workforce, equating to roughly 10,000 jobs. This downsizing trend is not unique to Microsoft, with Alphabet, Amazon, Meta, and other tech industry leaders also making similar cutbacks recently.
In contrast to last year’s response to inflation, which saw Microsoft nearly doubling the merit increase budget and enhancing stock allocations for certain staff, this year’s compensation adjustments will be more in line with historical averages. Nadella’s email stated, “We will maintain our bonus and stock award budget again this year, however, we will not overfund to the extent we did last year, bringing it closer to our historical averages.”
The email also revealed a significant reduction in performance bonuses for Microsoft’s top executives compared to last year. Microsoft has yet to publicly comment on the matter.
In terms of financial projections, Microsoft CFO Amy Hood forecasted a slowdown in year-over-year revenue growth for the current quarter, dropping to 6.7% from 7.1% in Q1. Operating expenses are also expected to grow by less than 2%, a stark contrast to the 7.4% growth seen in the first quarter.
Also read: The CEO Who Revived Microsoft: The Incredible Story of Satya Nadella
Alongside comments on compensation, Nadella emphasized Microsoft’s strategy to exploit the expanding artificial intelligence market. He expressed confidence in Microsoft’s role in driving a significant platform shift amidst a dynamic, competitive landscape and global macroeconomic uncertainties.
Earlier this year, Microsoft declared a significant investment in OpenAI, a startup that uses Microsoft’s Azure cloud to operate its popular ChatGPT chatbot and supply extensive language models like GPT-4 to bolster apps from Microsoft and various other companies.
Hood also announced last month that Microsoft’s capital expenditures would see a quarter-over-quarter increase due to investment in Azure AI infrastructure.
