Microsoft: Employees under pressure while profits bubble up
While it has just been announced that Microsoft wants to get rid of around a quarter of its workforce, the company has now reported another significant increase in profits. 36.6 billion dollars (about 31 billion euros) net surplus was generated in just three months.
New record income
A few days before the announcement of the latest business figures, the company announced that it would make severance offers to around 60,000 employees if they left the group voluntarily. The background is the high expenditure on expanding the infrastructure for artificial intelligence (AI).
Now it was said from Redmond that the very employees who are now supposed to cut back have generated sales of 92.3 billion dollars (around 79 billion euros). That is 19 percent more than in the same period last year. The cloud business developed particularly strongly: Microsoft Cloud revenues increased by 30 percent. This area includes various cloud and enterprise services with which Microsoft covers a growing part of its business. The figures exceeded analysts’ expectations.
Like other large technology companies, Microsoft is currently investing significant sums in data centers, powerful chips and other technical foundations for AI applications. The group has to manage the balancing act between expanding new business areas and controlling its costs. Whether the enormous investments will pay off in the long term is still an open question. The financial markets are therefore watching the quarterly figures of the big tech companies particularly closely. Amazon, Meta and Google’s parent company Alphabet are expected to invest enormous amounts in AI chips and data centers this year, along with further industry investments. A total of more than 700 billion dollars (around 602 billion euros) is expected to be spent on Amazon, Meta and Alphabet alone.
Nadella is optimistic
In any case, Microsoft boss Satya Nadella is already seeing positive effects from AI technology. Recent developments have accelerated their spread and are showing concrete results in numerous industries, he explained. However, independent observers only share this optimism to a limited extent. Consistent with other studies, an economist has just come to the conclusion that AI integration into company processes has so far had little positive impact on overall productivity. At the same time, Microsoft referred to risks in its forecast, which also include the significant investments in AI. The enormous investments in new data centers are not yet matched by any income from AI marketing that could be used to recoup the expenses.
The development contrasts with Alphabet’s results. The Google parent company disappointed investors with a 25 percent decline in quarterly profits. The share then lost 9.75 percent. Alphabet also announced that it would continue to invest heavily in AI. The different reactions show how closely investors are now paying attention to whether the high spending is reflected in corresponding growth.
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