Microsoft (NASDAQ: MSFT) shares dipped Wednesday after the tech giant announced it was cutting around 10,000 jobs, or around 5% of its workforce, in an attempt to cut costs.
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Microsoft shares closed Wednesday’s session down 1.89%.
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The cuts, which were reported earlier in the day, are in response to the current macroeconomic conditions and “changing customer priorities,” the company said.
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The company expects to reduce its workforce by the end of the third quarter of this year, while it will also take other actions, such as changes to its hardware portfolio and lease consolidation, to create higher density across its workspaces.
Microsoft expects its actions to result in a charge of $1.2 billion in the second quarter of its 2023 fiscal year, representing a $0.12 negative impact on its diluted earnings per share.
Following the news, Morgan Stanley analyst Keith Weiss reacted by maintaining an Overweight rating and a $307 price target on Microsoft shares. He stated in a research note to clients that the reduction could result in over $2 billion in annualized savings, strengthening Microsoft’s commitment to margins.
Meanwhile, later in the day, Bloomberg reported that the layoffs could extend to internal video game studios.
According to TipRanks, out of 29 Wall Street analysts covering Microsoft, 26 have a Buy rating on the stock, two have a Hold rating and one has a Sell rating on Microsoft shares. In addition, the average price target is $282.70, representing a potential 19.88% upside from current levels.
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