Wall Street Is Loving the Layoffs at Microsoft. Buy the Dip.

Omor Ibne Ehsan

Tue, May 19, 2026 at 10:16 AM PDT 4 min read

Microsoft-owned LinkedIn (MSFT) is the premier place people go to when they want to find a job. Strangely, LinkedIn recently fired a chunk of its own employee base, presumably due to AI. It announced that 900 employees are being let go from its global workforce of 17,500.

That may not look like a lot, but it does signal that they have started cutting back on their workforce. Usually, this would mean that budgets are tight, but that's no longer the case in 2026.

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In fact, it could signal a shift toward broader layoffs, beyond just LinkedIn. You could see healthy, fast-growing businesses start doing layoffs as they grow, simply because AI can do the job cheaper and Wall Street wants to see more money being spent on AI instead.

LinkedIn's business is performing well. The company recently reported 12% year-over-year revenue growth and had just crossed $5 billion in quarterly revenue for the first time earlier this year. CEO Daniel Shapero said the cuts were a move to "reinvent how we work, with agile teams focused on our highest priorities," while scaling back spending on marketing campaigns, vendor partnerships, customer events, and underutilized office space.

Microsoft Will Likely Keep Laying Off Workers

For the first time in its history, the company is planning voluntary early retirement for 7% of its U.S. workforce. That's on top of 15,000 workers being laid off last year, and that's even before most programming was done using AI. Now, no white-collar employee is truly "safe" from being laid off. Of course, AI cannot do everything on its own, but Microsoft needs far fewer workers to build and upkeep software now. Even non-software roles are starting to see pressure due to the barrier to entry caving in.

Microsoft's gaming, sales, and middle management may see more layoffs in the coming years. Gaming has been among the victims in recent years, and it could see more cuts due to AI. Many Microsoft employees in the gaming segment either does artwork, programming, story writing, or something along those lines. AI has cheapened all of that immensely.

Microsoft is also completely overhauling its HR function for the "AI era," and it is consolidating teams like People Analytics, Talent Management, and Culture & Inclusion. Several long-tenured HR leaders have already departed.