Microsoft employees won’t be getting raises this year as the tech giant continues to cut costs.
Insider first reported the news Wednesday, citing a memo from Microsoft CEO Satya Nadella detailing why the company decided to halt salary increases — just one year after Microsoft made a significant additional investment in employee compensation.
“As a company we recognize that navigating both a dynamic economic environment and a major platform shift requires us to make critical decisions in how we invest in our people, our business and our future,” a Microsoft spokesperson said in a statement to GeekWire. “As part of that effort, we are funding our compensation to align with the overall market. While we will not be providing salary increases for our full-time salaried employees this year, we will continue to invest in our employees through promotions, bonus and stock.”
The decision to not provide salary boosts comes one year after Microsoft said it planned to nearly double its global budget for merit-based salary increases, and increase its range for annual stock-based compensation by at least 25% for employees at the senior director level and below.
Microsoft will not “overfund” its bonus and stock award budget like it did last year, Nadella said in the memo.
The 180-degree shift reflects the new economic environment for Microsoft and other tech companies that are looking for ways to reduce expenses. Fellow Seattle-area tech giant Amazon is reducing stock awards this year.
Microsoft is navigating various macroeconomic headwinds, including a pullback in business technology budgets and more cautious customer spending for cloud services and software licenses that drive the bulk of Microsoft’s business.
To help curb costs, Microsoft announced 10,000 global layoffs on Jan. 18. GeekWire reported Wednesday on additional layoffs being made in Washington state, where the company is headquartered.
Microsoft last month reported revenue of $52.9 billion for its fiscal third quarter, a 7% increase from last year. The company beat analyst expectations of $51 billion. Profits came in at $18.3 billion, up 9%.
The 7% revenue increase represents the second straight quarter of single-digit growth. It’s a far cry from 18 months ago, when Microsoft’s year-over-year revenue growth peaked at more than 20% as the company and broader tech economy emerged from the pandemic with a head of steam.
Microsoft has released a steady stream of products and features integrating OpenAI’s GPT-4 and ChatGPT technologies, including Microsoft 365, Bing, Dynamics, GitHub, and security.
However, with many of those products still in testing phase, Microsoft’s larger financial payoff from those releases (and its “multibillion dollar” OpenAI investment) could still be years away.
Microsoft stock is up 29% this year, and up 15% over the past 12 months. The company ended its fiscal third quarter with $104.4 billion in cash, cash equivalents, and short-term investments.
