Microsoft's Tough Call: CEO Reportedly Freezes Pay Hikes Citing AI Focus, Economic Turmoil

Microsoft Corp.'s MSFT own year of efficiency could get more efficient now as Redmond reportedly looks to freeze pay hikes for full-time salaried employees.

What Happened: "While we have salary increases for certain hourly or equivalent roles, we will not have salary increases for full-time salaried employees this year," Microsoft CEO Satya Nadella told employees in an email, Fortune reported.

The bonus and stock award budget as well as the promotion budget remains untouched, he reportedly said, adding that exceptional performances will be recognized with higher rewards.

The executive blamed macroeconomic conditions for the predicament. "We are clear that we are helping drive a major platform shift in this new era of A.I., and doing so in a dynamic, competitive environment while also facing global macroeconomic uncertainties," Nadella said, as per Fortune.

Nadella also indicated that senior management, including himself, will see a reduction in performance-based bonuses compared to the previous year.

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Why It's Important: The tech sector witnessed a downturn in 2022, with most companies announcing heavy austerity measures. As topline growth became difficult to come by, most resorted to the strategy of cutting flab and skimping on costs to keep profitability intact.

Microsoft announced in late January plans to eliminate 10,000 jobs. Earlier this week, the company’s professional networking unit, LinkedIn, said it would let go of 716 employees.

The need to preserve cash becomes all the more important for Microsoft as it has dived deep into the AI arena with its fresh $10 billion OpenAI investment. As other big techs play catchup, the software giant must continue investing resources to keep it ahead of the competition.

Microsoft closed Wednesday's session 1.73% higher at $312.31, according to Benzinga Pro data.

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