Microsoft is seemingly off to a bumpy start to the year. Barely a few weeks into 2025, the software giant announced two rounds of layoffs. First, the company announced performance-based job cuts across departments, including security, slated to impact "less than 1%" of the workforce. More recently, the company was hit by another round of layoffs, impacting employees across security, experiences, sales, devices, and gaming departments.
Now, the Redmond giant has announced a hiring freeze, which is expected to impact its consulting business in the U.S. as part of its broader plans to cut costs (via CNBC). Per the internal memo, Microsoft's consulting division won't be able to hire employees for new roles or replacements for vacancies within the division.
Microsoft's consulting executive Derek Danois indicated that proper management of costs is of "utmost importance" in the organization. Additionally, employees have been advised to refrain from expensing travel for internal meetings, prompting them to lean more toward "remote sessions" arrangements. More on the travel arrangements and expenses, executives will have to authorize customer site visits to ensure the resources are channeled toward the "right customers."
Finally, Microsoft will also cut the consulting business' marketing and nonbillable external resource budget by 35%. The drastic changes could potentially be attributed to the division's performance and income generation capability. Compared to Microsoft's productivity software subscriptions and Azure cloud computing, the consulting division growth is seemingly stunted, generating $1.9 billion during the company's September earnings call.
Elsewhere, the tech giant is slated to continue heavily investing in generative AI while integrating the tech across its tech stack despite mounting profitability concerns among investors and its reported internal struggles with Copilot and AI.
This isn't entirely surprising, especially after a leaked internal document revealed that Microsoft managers favor employees with impressive AI contributions when requesting retention bonuses. AI-focused workers are reportedly handsomely compensated compared to their Azure and cloud department counterparts.
