Savings from automation and layoffs are funding new investments in artificial intelligence

Microsoft’s latest round of layoffs has become a familiar corporate “tradition.” Last week, the software giant announced that it would cut approximately 4,800 jobs, marking yet another round of staff reductions, even as it remains profitable and invests heavily in artificial intelligence (AI).

Similar layoffs, from Amazon to Meta, have become widespread in the tech sector in recent years, even as many of these companies allocate massive budgets to artificial intelligence.

In May, Cloudflare laid off more than 20% of its workforce, according to Business Insider.

CEO Matthew Prince, in an op-ed he published in the Wall Street Journal following the layoffs, noted that the company had not seen any other publicly traded company in the U.S. make such drastic cuts while simultaneously posting a growth rate of over 30%.

“However, what we did will likely become the norm over the next year,” Prince said.

It appears that other companies have gotten the message as well. In May, Cisco reported record revenue for its third fiscal quarter and announced that it would cut nearly 5% of its workforce.

When announcing the cuts, CEO Chuck Robbins stated that the companies that will thrive in the age of artificial intelligence are those that have the discipline to “continuously shift investments” toward sectors with the greatest long-term potential.

Instead of waiting for certainty, many companies are proceeding with mass layoffs as they try to figure out how artificial intelligence will reshape their businesses.

MICROSOFT JUST MADE IT OFFICIAL. 4,800 JOBS GONE, AND XBOX TAKES THE BIGGEST GAMING LAYOFF EVER ANNOUNCED.

Here’s everything happening today.

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The cuts: 4,800 people, 2.1% of the company. Xbox accounts for 3,200 of them, with 1,600 let go on day one. That breaks the record for a… pic.twitter.com/DEfshqZmc6

— LayoffHedge (@LayoffAI) July 6, 2026

“Continuous Adaptation”

Companies are citing layoffs more and more frequently, especially in the name of technological progress.

Microsoft stated that its latest layoffs are not related to artificial intelligence. Similarly, Amazon noted that artificial intelligence was not the reason for the vast majority of its layoffs over the past two years.

A Meta spokesperson referred to a statement the company issued regarding the May layoffs, in which it noted that the changes varied by team and included reassigning thousands of employees to other priorities.

Some companies in the information sector—which includes technology and media—are making cuts following high levels of hiring during the pandemic.

Furthermore, because artificial intelligence can help automate certain tasks, a degree of restructuring can help companies operate more efficiently. These savings can, in turn, be allocated to costly investments in artificial intelligence.

While some companies have made drastic cuts as they try to chart a course toward the future, companies are unlikely to announce mass layoffs unless they face an obstacle such as serious financial problems, said Joseph Fuller, a professor at Harvard Business School.

Overall, Fuller expects that many companies will make smaller, recurring adjustments—what he calls “continuous optimization.”

One reason, he noted, is that companies have spent roughly the last quarter-century continuously cutting costs, leaving relatively few unnecessary elements left to cut.

Moyan Chen, a data scientist who was laid off by Meta as part of the May layoffs, had previously told Business Insider that when the layoff she had been dreading finally came, “it was more of a relief than a blow.”

The Cost of Continuous Layoffs

Smaller teams can reduce inefficiencies and middle management layers. However, some companies are realizing they’ve gone too far and have been forced to rehire staff for positions they had eliminated, hoping that artificial intelligence could take over the work.

Repeatedly laying off employees and hiring replacements can be a costly cycle, given the costs of severance pay, hiring, training, and additional external contractors, said Jeffrey Pfeffer, a professor at Stanford University’s Graduate School of Business.

If repeated layoffs remain a management strategy rather than a tactic to cope with a recession, companies may be underestimating what they stand to lose, he added.

Pfeffer noted that recurring rounds of layoffs create constant uncertainty within organizations, encouraging top employees to leave, while at the same time weakening the relationships and accumulated knowledge that make companies effective.

When a company rehires staff, he said, “coordination and communication won’t be the same as they would have been if you’d been working together for a while.”

Fuller of Harvard noted that, as artificial intelligence takes on more and more work, companies will need more—not fewer— people with a deep understanding of the context of corporate processes, markets, competitors, customers, suppliers, and industry regulations.

“You have to keep people who know what they’re talking about,” he said.

Source: in.gr