The move aligns with Microsoft’s efforts to reduce costs as revenue growth slows and clients reel in spending. In January the software maker said it would cut 10,000 jobs, or just under 5% of its workforce. Alphabet, Amazon, Meta and other tech companies have downsized as well in recent months.
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Last year, as inflation rippled through the economy, Microsoft nearly doubled the budget for merit increases and boosted stock allocations for certain employees. This year, compensation will look more normal.
“We will maintain our bonus and stock award budget again this year, however, we will not overfund to the extent we did last year, bringing it closer to our historical averages,” Nadella wrote in the email. Microsoft did not immediately respond to a request for comment. Insider reported on the message earlier.
Nadella said performance bonuses for Microsoft’s top executives will be down considerably from last year.
In April, Microsoft finance chief Amy Hood said year-over-year revenue growth in the current quarter would slow to 6.7% from 7.1% in the first three months of the year. The company also called for operating expenses to grow less than 2%, compared with 7.4% growth in the first quarter.
In addition to his comments on pay, Nadella highlighted Microsoft’s effort to capitalize on a growing artificial intelligence market.
“We are clear that we are helping drive a major platform shift in this new era of Al, and doing so in a dynamic, competitive environment while also facing global macroeconomic uncertainties,” Nadella wrote.
In January, Microsoft announced a multibillion-dollar investment in startup OpenAI, which relies on Microsoft’s Azure cloud to run its viral ChatGPT chatbot and provide large language models such as GPT-4 to power apps from Microsoft and a variety of other companies.
Hood said last month that Microsoft’s capital expenditures would increase quarter over quarter because of investment in Azure AI infrastructure.