Microsoft says AI has saved it $500 million as it continues cutting jobs

Microsoft has revealed that its use of AI in customer service and engineering has saved the company more than $500 million, even as it pushes ahead with sweeping layoffs across departments. According to a Bloomberg report citing Chief Commercial Officer Judson Althoff, AI is already driving measurable improvements in internal workflows, from customer support to software development.

Cost Cuts and Layoffs

The Redmond-based tech giant recently laid off around 9,000 employees, in addition to earlier cuts this year that impacted nearly 6,000 more. The layoffs, which affected teams across engineering, programme management, marketing, design, data science, legal, and support, amount to about 4% of Microsoft’s total workforce.

Washington state records reviewed by the Seattle Times show that 993 of the affected employees were engineers, while significant numbers came from product management (410), programme management (412), and other technical roles.

These workforce reductions have raised concerns about the growing role of AI in replacing human labour, a sentiment echoed by Microsoft’s competitors. Executives at Alphabet, Meta, and Salesforce have all spoken about how AI tools are now handling major chunks of internal workloads, including code generation and business operations.

AI’s Role in Boosting Productivity

Althoff told employees this week that AI was playing a central role in transforming Microsoft’s internal productivity. In the company’s call centres alone, AI-driven tools saved more than $500 million last year while also improving customer and employee satisfaction.

Microsoft is also beginning to use AI to interact with smaller clients, a move Althoff said is already generating tens of millions of dollars in revenue. On the development side, AI now accounts for 35% of all code written for new Microsoft products, significantly reducing time-to-market.

Tools like GitHub Copilot, which Microsoft said had reached 15 million users as of April, are at the centre of this transformation. The company says sales teams using its AI-powered Copilot assistant are now closing deals faster, finding more leads, and generating 9% more revenue.

While Microsoft insists that AI was “not a predominant factor” in the recent layoffs, as stated by company President Brad Smith, it’s clear that the technology is reshaping how work gets done across the organisation.

The Bigger Picture

Microsoft has committed $80 billion in capital spending this fiscal year, with the majority allocated to data centre expansion to support its growing AI infrastructure. The company’s heavy investment in AI mirrors a broader trend among Big Tech firms, which are funnelling resources into automation and machine learning while simultaneously looking to cut operational costs elsewhere.

Despite its reassurances, Microsoft’s evolving workplace, powered increasingly by AI, is raising new questions about the balance between innovation, efficiency, and job security in the age of automation.