• by Laurie Sullivan  @lauriesullivan, June 4, 2024

Google and Microsoft cut hundreds of employees from their respective cloud business, according to people familiar with the situation.

Reasons for the layoffs have not been confirmed, but both companies reported positive results in cloud services last quarter, so it’s not clear if cuts were due to declining business or efficiencies in generative artificial intelligence (GAI).

Microsoft CEO Satya Nadella in April reported Microsoft Cloud had surpassed $31.8 billion in revenue for the third quarter in fiscal year 2024, up 24% year over year (YoY).

The layoffs impacted teams including Azure for Operators and Mission Engineering, the people said. One estimate put the Azure for Operators layoffs at about 1,500.

The two teams are part of a Microsoft organization created to house moonshots, created in 2021 before Microsoft began working with OpenAI. Former Azure boss Jason Zander led the initiatives. Similar to Google’s moonshot business, it brings together innovative initiatives such as quantum computing and space alongside its government cloud business. 

Google is laying off at least 100 employees from several teams in its cloud unit, CNBC reported on Monday, citing internal correspondence.

Roles in sales, operations and engineering, consulting and "go to market" strategy were some of the positions cut.  

Google Cloud's business also saw a boost in revenue for the first quarter of 2024. The company reported $9.57 billion, up 28% from the year-ago quarter. 

Reports put the quarter at the highest YoY sales growth rate of the three major cloud companies, beating Microsoft's 21% and Amazon Web Services’ 17%. 

Google Cloud's revenue growth driven by demand for GAI tools that use cloud infrastructure, services, and apps could have led to the layoffs. The division said it generated $900 million in operating income during the quarter, accounting for almost 12% of Google's total revenue of $80.54 billion.