Microsoft’s Azure chief seeks at least 20% cost cuts - report

Microsoft (MSFT) Azure president Girish Bablani reportedly asked senior leaders in his unit to identify ways to cut costs by at least 20%, The Information reported, citing a person with direct knowledge of the discussions.

Azure has approximately 60,000 employees overall, while Bablani’s group has about 11,500 employees. The report did not establish whether the discussions would lead to layoffs or other specific measures.

However, a Microsoft (MSFT) spokesperson disputed the characterization, saying Azure leadership had not directed teams to develop cost-cutting plans. "Azure leadership has not directed teams to develop cost-cutting plans. Every responsible company prepares for a range of scenarios and market dynamics, both positive and negative," according to the report.

The discussions come as Microsoft (MSFT) faces rising AI infrastructure costs and competition for talent from companies including Anthropic and Meta Platforms (META). Azure leaders have also discussed the cost of retaining employees amid competition for AI talent.

Potential savings could include ending external-worker contracts, while greater AI adoption is intended to boost employee productivity, according to the report.

Azure generated $101.9B in revenue in the 12 months ended in June, up 40% Y/Y. Revenue grew 43% in the June quarter, representing about 31% of Microsoft’s (MSFT) total revenue.

Separately, Microsoft (MSFT) is reorganizing its cloud leadership. Arun Ulag, who previously led Azure’s database business, is taking on broader responsibilities that include executives overseeing Azure Core, which provides computing capacity to customers such as OpenAI (OPENAI).

Azure chief Scott Guthrie announced the changes internally on Monday and will continue to oversee Ulag. Charlie Bell, Microsoft’s (MSFT) former security chief, will also report to Ulag, the report added.