Microsoft offers buyouts for longtime employees

Microsoft is offering voluntary retirements to thousands of its employees in the United States — for the first time in the tech giant’s 51 years.

The retirement program, which has little precedent in the tech industry, is Microsoft’s latest effort to manage its head count.

The Redmond-based software maker, like other tech companies, is in the middle of a spending spree on artificial intelligence infrastructure and looking to cut costs.

The voluntary retirements are a one-time offer for U.S.-based employees whose number of years at the company plus their age equals 70. Out of Microsoft’s 125,000 employees, roughly 7% are eligible.

Amy Coleman, Microsoft’s chief people officer, said in a memo to employees Thursday that the retirement program is available for those at the senior director level and below, excluding roles on sales incentive plans. Eligible employees will get more information on May 7, Coleman said.

“Our hope is that this program gives those eligible the choice to take that next step on their own terms, with generous company support,” Coleman said.

Along with the retirement program, Microsoft is changing its pay structure.

The company is streamlining its pay levels to provide better pay transparency for employees. Microsoft is also separating stock awards from bonuses, which have been tied together. As bonuses are based on performance ratings, the move will give managers more flexibility to reward employees in the long term with stock awards.

Over the past few years, Microsoft has conducted rounds of layoffs — large and small — to flatten its corporate structure, especially among the manager ranks. The push to trim the organization is part of a broader effort to keep the company nimble as it focuses its effort on AI, the company has said. But the rising costs of investing in the technology have also driven layoffs, including last year when the company announced it was cutting roughly 15,000 jobs.

Microsoft’s layoffs last year came two years after the company announced 10,000 job cuts amid widespread workforce reductions in the industry. Though at the time, tech layoffs were chalked up to companies right-sizing themselves after pandemic-induced hiring booms.

Morale among employees at the company soured last year, as workers said the layoffs felt impersonal and random. Employees were also grappling with the disconnect between repeated cuts and Microsoft’s record-breaking quarterly revenue and profits. CEO Satya Nadella addressed that “incongruence” in a memo to employees last summer, saying the layoffs were “weighing heavily” on him.

Layoffs at other tech companies recently have set employees on edge as well. After Amazon announced sweeping cuts in October, employees felt another wave was around the corner. Some workers described a mounting pressure to ramp up their efforts to avoid whatever workforce reduction was on the horizon.

Those fears were founded, as Amazon announced more layoffs in January. Ultimately, 30,000 Amazon employees were let go between the two rounds.

Cuts are still hitting the tech industry both locally and nationally.

As dreams of CEO Mark Zuckerberg’s metaverse crumbled, the Facebook parent company said it was laying off 10% of its Reality Labs division in January. That was followed by hundreds of roles cut among virtual reality teams last month.

Then on Thursday, Meta said it was conducting significant cuts for the third time this year. As the company abandons the metaverse ambitions, it’s pushing more of its resources into the AI race as it strives to catch up to competitors.

The company has not disclosed how many Seattle-area employees will be affected in the latest round of layoffs. Meta has already laid off 600 local employees since October, according to state regulatory filings.

Microsoft’s buyouts signal that the company may be seeking other ways to keep its head count flat amid heavy capital expenditure investments in its AI build-out. Earlier this year, the company flatly denied rumors of thousands of job cuts slated for January.

But Microsoft has shown no signs of backing off its capital expenditure costs. The company spent $88 billion in its 2025 fiscal year on data centers and high-powered computer chips to cover AI demand, which was an eye-popping figure at the time.

Microsoft is now well on its way to soar past that amount. In the first six months of its 2026 fiscal year, which ran from July through December, Microsoft’s capital expenditure costs totaled $72 billion.

Rob Lalka, a professor at Tulane University who focuses on Big Tech and entrepreneurship, said it’s clear that tech companies shifting their priorities are driving layoffs and workforce reductions.

“AI is not at a point where it’s replacing this many people in a white-collar workforce,” Lalka said. “These companies are just putting so much money into the build-out of this technology. This is a financial conversation, not a human capital conversation.”

The stream of layoffs and Microsoft’s unprecedented retirement program show a complete reversal from how tech operated for decades, according to Lalka.

“For years, tech was compelling because companies didn’t need to spend much money on the software they sold to scale it up,” he said. “People were where you spent your money.”

Microsoft will report financial results for the third quarter of its fiscal 2026 next week. The company will also give an update on its capital expenditure costs for the year.

This coverage is partially underwritten by Microsoft Philanthropies. The Seattle Times maintains editorial control over this and all its coverage.