Microsoft is set to lay off about 3% of its workforce, which translates to roughly 7,000 employees, according to a report from CNBC on Tuesday. The company is making these cuts as part of its broader strategy to manage costs while heavily investing in artificial intelligence (AI) technologies, which it sees as a key growth driver for the future.

The layoffs will span various levels of the company and impact workers across different regions, likely making this the largest round of job cuts since the tech giant reduced its workforce by 10,000 employees in 2023. Although Microsoft made a small number of layoffs earlier this year due to performance issues, this new round is focused on streamlining management layers, the report noted.

Microsoft has yet to respond to Reuters' request for a statement on the layoffs. The company’s stock showed a slight dip during early morning trading following the news.

Like many other major tech companies, Microsoft has been channeling substantial investments into AI as it seeks to secure its position in the competitive tech landscape. Google has also made similar moves, cutting jobs to manage costs while shifting focus to AI advancements. These efforts come amid a broader push from Big Tech to prioritize AI while cutting expenses elsewhere to maintain strong profit margins.

Microsoft’s decision to scale down its workforce follows a period of strong performance, particularly in its cloud-computing business, Azure, which reported better-than-expected growth in its latest quarter. However, the company's increasing expenditure on AI infrastructure has put pressure on its profitability, with the margins for Microsoft Cloud shrinking to 69% in the March quarter, down from 72% the previous year.

In its ongoing efforts to support its AI ambitions, Microsoft has committed $80 billion in capital expenditures for the current fiscal year, most of which will go toward expanding data centers to support the growing demand for AI services. Analyst Gil Luria from D.A. Davidson commented that the layoffs reflect Microsoft’s strategy of managing the financial strain caused by its large-scale AI investments, suggesting that sustained high levels of capital spending could necessitate further workforce reductions to offset higher depreciation costs.