Microsoft CEO Satya Nadella announced in an email to staffers on Wednesday that the company will not offer salary increases to full-time employees at this time. The move is part of Microsoft’s efforts to cut costs due to slowing revenue growth and reduced client spending.
In January, the software giant said it would eliminate 10,000 jobs, representing about 5% of its workforce. Other tech companies such as Alphabet, Amazon, and Meta have also downsized in recent months.
Last year, Microsoft increased the budget for merit increases and stock allocations for certain employees as inflation affected the economy. This year, the compensation structure will look more normal as the company maintains its bonus and stock award budget but does not overfund it to the same extent as last year.
Nadella emphasized that performance bonuses for Microsoft’s top executives will be considerably lower this year than last. He also highlighted the company’s efforts to capitalize on the growing artificial intelligence market.
In his email, Nadella stated that Microsoft is clear in its goal of driving a major platform shift in this new era of AI, which it is doing in a dynamic, competitive environment while facing global macroeconomic uncertainties.
In January, Microsoft announced a multibillion-dollar investment in startup OpenAI, which uses Microsoft’s Azure cloud to run its ChatGPT chatbot and provide large language models such as GPT-4 to power apps from Microsoft and other companies.
In April, Microsoft’s finance chief Amy Hood stated that the year-over-year revenue growth for the current quarter would slow to 6.7% from 7.1% in the first three months of the year. Additionally, the company called for operating expenses to grow less than 2%, compared with 7.4% growth in the first quarter.
Despite the news of no salary increases, Nadella’s email aimed to maintain a positive outlook, highlighting Microsoft’s past accomplishments and future prospects. While the company faces uncertainties, he expressed confidence in its ability to navigate them and continue to make progress.
It is not clear how Microsoft employees will react to the news of no salary increases. However, the company’s efforts to reduce costs and focus on artificial intelligence suggest that Microsoft is positioning itself for long-term growth and success in a rapidly evolving tech landscape.