Microsoft is pushing back on reports that the tech giant is considering major cuts to its cloud division amid increased spending on artificial intelligence.
Citing sources familiar with the situation, The Information reported yesterday that Microsoft Azure Core president Girish Bablani has directed leaders in the division to develop plans to cut costs by at least 20%.
Such cuts may be necessary to offset massive spending on AI data centers and free up funds for bidding wars over top talent. While the exact nature of the cuts is not clear, one option may be to let go of external contractors.
A Microsoft spokesperson refuted the report, however, calling it “inaccurate and careless” and denying that Azure leadership has ordered managers to identify potential cuts.
“Azure leadership has not directed teams to develop cost-cutting plans,” a Microsoft spokesperson said in a statement provided to Fast Company. “Every responsible company prepares for a range of scenarios and market dynamics, both positive and negative.”
The rapid rise in AI use has put immense pressure on tech companies to invest heavily in data center infrastructure. During its 2026 fiscal year, Microsoft reported $145.3 billion in capital expenditures, including data center costs. This included $41 billion in the quarter ending in June, a 69% jump from the same quarter a year before.
Other leading tech companies, including Amazon Web Services and Oracle, have made significant workforce reductions to free up cash for AI spending. Meta has laid off more than 10,000 workers this year as part of a broader pivot toward AI.
Microsoft’s Azure unit, the company’s cloud computing platform, generated $101.9 billion in revenue for the 12 months ending in June, up 40% over the same period a year before.
In a separate development earlier this week, Microsoft announced internally yesterday that it would reorganize leadership within its cloud division to consolidate oversight of key divisions under senior executive Arun Ulag. Ulag previously managed Azure’s database product line.
