Microsoft’s Voluntary Severance Plan Signals a New Era as Earnings Test Looms

For the first time in its 51-year history, Microsoft is offering voluntary buyout packages to a swath of its US workforce — a clear signal that the company is reshaping its cost structure to align with the demands of the artificial intelligence era. The move comes just days before the tech giant is set to report fiscal third-quarter earnings, where investors will be scrutinizing both the pace of Azure’s growth and the financial logic behind its massive AI infrastructure spending.

The “Rule of 70” and Who Qualifies

The early retirement program targets US employees up to the level of senior director whose age plus years of service equals at least 70. A 45-year-old with 25 years at the company qualifies, as does a 52-year-old with 18 years of tenure. Roughly 8,750 employees — about 7 percent of Microsoft’s US workforce — are expected to meet the threshold.

Microsoft has not yet disclosed the exact financial terms of the packages, but they are known to include extended healthcare benefits. Departing employees will not face any non-compete restrictions. The actual uptake will depend heavily on the package value, which is set to be communicated on May 7.

The voluntary program follows multiple rounds of layoffs last year that eliminated more than 15,000 positions. In March 2026, Microsoft froze new hiring in Azure Cloud and North American sales, explicitly excluding AI and Copilot teams. The approach stands in contrast to peers like Oracle, which recently cut up to 30,000 jobs, and Meta, which is planning to eliminate 8,000 roles. Microsoft’s softer touch buys the company more room on the public relations front.

The AI Investment Gap

Behind the workforce restructuring lies a clear arithmetic problem. Microsoft is pouring billions into AI infrastructure, yet adoption of its flagship 365 Copilot service remains stuck at just over 3 percent of the 450 million 365 customer base. The mismatch between spending and revenue is squeezing margins.

CEO Satya Nadella did offer one piece of concrete progress amid the turbulence. The Fairwater data center in Mount Pleasant, Wisconsin, is coming online earlier than planned. The facility spans 1.2 million square feet and connects hundreds of thousands of Nvidia GPUs into a single cluster. Microsoft has pegged its total investment in Wisconsin at more than $7 billion. The early opening signals that capacity constraints that have been holding back Azure growth may be easing faster than feared. Microsoft has not yet confirmed whether workloads are already running on the site.

Should investors sell immediately? Or is it worth buying Microsoft?

Market Skepticism and the ServiceNow Shock

The stock has fallen roughly 14 percent since the start of the year and sits 23 percent below its all-time high. That is not a short-term blip — it reflects structural concerns about Microsoft’s spending plans and Azure’s growth trajectory.

On April 23, a sector-wide selloff triggered by ServiceNow’s disappointing quarterly results dragged Microsoft shares lower, even though the company itself reported no bad news. ServiceNow’s weak print raised doubts about whether AI applications are putting pressure on traditional software-as-a-service providers — a question that cuts to the heart of Microsoft’s business model.

Azure grew 39 percent year-over-year in the second quarter of fiscal 2026, one percentage point slower than the prior quarter. The reaction was brutal: the stock fell nearly 10 percent the next day, even though revenue and earnings beat expectations. Since hitting a low in late March, the stock had recovered 21 percent. The ServiceNow shock abruptly halted that rebound.

What to Watch on April 29

Microsoft reports fiscal third-quarter results after the US market close on Wednesday, April 29. The company’s own revenue guidance ranges from $80.65 billion to $81.75 billion. Analysts expect adjusted earnings per share of $4.04, representing growth of nearly 17 percent from the year-ago period. Microsoft has beaten expectations in each of the past four quarters.

One topic likely to dominate the earnings call is the backlog. At the end of December, it stood at $625 billion. But $281 billion of that — 45 percent — comes from OpenAI alone. Critics question whether that portion of the backlog is reliable, and CFO Amy Hood will almost certainly face questions about it. She will also be pressed on the voluntary severance program, which is set to begin in the fourth quarter and will reignite the cost debate around Microsoft’s AI bet.

According to GuruFocus, the stock’s fair value sits at roughly $542, about 23 percent above the current price. The price-to-earnings ratio of 26 is well below the five-year average of 34. Of 49 analysts covering the stock, 41 rate it a “Strong Buy.” The valuation is attractive on paper. Whether the market agrees on April 29 will depend heavily on what Nadella says about Azure growth and the OpenAI backlog.