02 Jul 2025 3 min read 2025 Trends

Why Microsoft Is Firing AI Engineers — Even While Betting Everything on AI

Microsoft just laid off 9,000 employees—including AI engineers. But this isn't a retreat from AI. It's what scaling actually looks like. Here's why Copilot revenue is up, and headcount is down.

Microsoft’s AI takes the CEO seat—while the humans pack up.

Summary
Microsoft just laid off 9,000 people—many of them in AI.
That’s not a contradiction. It’s a business model.
While Copilot revenue soars, GitHub losses mount, and OpenAI tensions brew.
Here’s why the most AI-forward company in the world is suddenly optimizing... itself.

So... Microsoft Loves AI. But Not That Much.

Remember when AI was supposed to save your job?
Now it’s saving Microsoft’s margins—by eliminating your job.

In July 2025, Microsoft fired 9,000 employees, including software engineers, product managers, and even people who worked on GitHub Copilot.
This wasn’t a pivot away from AI. This was AI… pivoting on people.

Meanwhile, CEO Satya Nadella announced that AI now writes 30% of Microsoft's code.
Which, if you're a developer, is like hearing your replacement is cheaper, faster—and already doing your work.

Welcome to the automation paradox. Or as Microsoft might call it: productivity.

Trend Breakdown

Who Got Cut — and Why

Total Layoffs (July 2025): 9,000 people (4% of MSFT workforce)
AI-Adjacent Teams:
- GitHub Copilot teams
- Washington engineering units (40% of 1,985 layoffs)
- Customer-facing roles in SMB sales (being outsourced)
Gaming Division:
- Rare’s game Everwild cancelled
- ZeniMax and King (Candy Crush) slashed
Geography:
- 1,985 layoffs in Washington
- 305 in June follow-up
- 122 in Bay Area
- Widespread EU cuts (esp. ZeniMax)

Copilot's Dual Reality

Product	Revenue	Profitability	Notes
Microsoft 365 Copilot	~$13B annual run rate	High ROI (up to 353%)	6% net revenue boost, 20% cost cut
GitHub Copilot	$100M ARR	Loses $20–80/user/month	OpenAI API cost sinkhole

Translation: Copilot is printing value in enterprise suites—while bleeding cash in dev tools.

Microsoft + OpenAI: Still Dating, Not Exclusive

Microsoft wants less dependence on OpenAI.
Integrating third-party and internal models into Copilot.
Negotiating to remove AGI termination clause from OpenAI deal.
OpenAI plans to reduce MS revenue share by 2030.
Partnership remains exclusive—on paper, at least.

Industry Imitators (or Competitors?)

Google: Laid off 200 in May, offering generous buyouts.
Meta: Split AI into “Product” vs. “AGI Foundation” teams. Targeted low performers.
Amazon: Cut 1,000 in legacy units (Books, Kindle), hired 4,000 for AI/R&D.

In short: it’s not just Microsoft.
It’s the new template—fire humans to fund the machines.

Why It Matters

This is not a collapse. It’s a convergence.
The Copilot economy is real—but it’s expensive. And margin math doesn’t lie.

Microsoft is playing a long game:

Keep the AI hype alive for Wall Street.
Trim the non-monetizing parts.
Reduce dependence on OpenAI (without losing access).
Show investors they’re “doing something” about costs.

The layoffs aren’t a sign that AI is failing.
They’re a sign that AI is growing up—and starting to ask for rent.

Takeaways

AI-first doesn’t mean AI-maximalist. You can build AI products and still fire AI engineers.
GitHub Copilot is cool, but not cheap. Until API costs drop, margins are mush.
Copilot for Office is the real moneymaker. B2B wins again.
OpenAI and Microsoft are getting a divorce... very slowly.
Expect more layoffs, not fewer. Especially in “legacy” roles now automatable.