Microsoft hints at workforce reduction despite 18% revenue hike in Q3 FY26

Microsoft may slow down hiring plans, reduce teams, or continue layoffs in the coming months. Amy Hood, the Chief Financial Officer of Microsoft, predicts that its workforce may be reduced as it focuses on more on AI investments, restructuring, or cost efficiency. The news comes just when Microsoft released its quarterly earnings report for FY26.

According to a Business Insider report, Hood discussed Microsoft’s expectations and plans with an analyst for its upcoming financial year, which will begin in July 2026 and end in June 2027. Hood highlighted, “We continue to evolve how we operate to increase our pace and agility, and therefore, we expect headcount to decrease year over year.”

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Before the earnings call, Hood shared an internal memo to employees highlighting that Microsoft plans to create smaller and more focused teams where responsibilities are clearer, and employees are expected to be more accountable for results. It also revealed that the company will continue to restructure, and the pressure may continue in efforts to become more efficient.

Recently, Microsoft offered voluntary retirement to 7% of its US workforce, affecting nearly 8,750 people. 

While it plans to reduce its workforce, its earnings report suggests that Microsoft recorded 18% increase in revenue, reaching to $82.9 billion. Satya Nadella, Microsoft CEO, said, “We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era.” 

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“Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year,” he added. Its Intelligent Cloud revenue climbed 30% to $34.7 billion, and it plans to spend more on building AI infrastructure. 

Previously, Microsoft announced to revamp its deal with ​OpenAI, locking 20% cut of the startup’s revenue through 2030 irrespective of its technological breakthroughs. However, Microsoft will no longer have exclusive rights to OpenAI’s products and AI models. On the other hand, OpenAI expands its partnership with Amazon, bringing its models and coding tools to AWS.