Microsoft (MSFT.US) Azure reportedly seeks a 20% cost reduction: intensifying AI costs and talent competition, with simultaneous restructuring of cloud leadership

According to Golden Ten Data APP, reports indicate that Girish Bablani, president of Microsoft (MSFT.US) Azure, has asked senior leaders in his department to look for ways to cut costs by at least 20%. This move comes as Microsoft faces rising costs for AI infrastructure and intensifying competition for AI talent.

The report states that Azure has about 60,000 employees overall, while Bablani’s team consists of about 11,500 employees. However, the report does not specify whether these discussions will lead to layoffs or other specific actions.

A Microsoft spokesperson refuted the above report, stating that Azure leadership has not instructed teams to draw up cost-cutting plans. The spokesperson said: “Azure leadership has not instructed teams to create cost-cutting plans. Every responsible company prepares for various scenarios and market dynamics, whether positive or negative.”

High AI Infrastructure Costs and Intensified Talent Competition

These cost discussions are happening as Microsoft faces rising AI infrastructure expenses, as well as talent competition from companies like Anthropic and Meta Platforms (META.US). The report states that Azure leadership also discussed the cost of retaining employees amid the battle for AI talent.

Potential savings measures may include terminating contracts with external employees, while Microsoft aims to boost employee productivity by more widely adopting AI.

Despite cost pressures, Azure continues its rapid growth. In the 12 months ending in June, Azure achieved revenue of $101.9 billion, up 40% year-over-year. In the quarter ending in June, Azure’s revenue grew 43%, accounting for about 31% of Microsoft’s total revenue.

Microsoft Restructures Cloud Business Leadership

Additionally, Microsoft is restructuring its cloud business leadership team. Arun Ulag, who previously led the Azure database business, will take on broader responsibilities, including overseeing executives for Azure Core. Azure Core provides computing power to customers such as OpenAI.

The report says Azure head Scott Guthrie internally announced these changes on Monday and will continue to lead Ulag’s work. Former Microsoft security chief Charlie Bell will also report to Ulag.