Are layoffs good for AI’s business?

Microsoft has shut its Africa Development Centre (ADC) in Nairobi, Kenya, leaving greater than 400 engineers with out jobs, following the closure of its Lagos engineering operation in May 2024. It has additionally closed gross sales workplaces in Windhoek, Abidjan, Dakar, Accra and Port-Louis. Microsoft says it “remains committed to Kenya”, however its retreat from the locations the place it as soon as promised to construct African engineering expertise tells a special story. As the corporate and its friends pour billions into synthetic intelligence (AI), these closures additionally reinforce a message that advantages the trade promoting it. AI is coming for your job, and the businesses constructing it are value investing in.

The Nairobi determination is tough to elucidate via efficiency alone. Employees accustomed to the centre say it had no high quality or efficiency issues, and a few acquired sturdy appraisal rankings earlier than studying their jobs have been in danger. Microsoft has not publicly mentioned poor efficiency prompted the choice. People near the matter say about 5 workers throughout buyer and companion options, recruitment, and gross sales will stay within the affected operation.

Announced in 2019, the centre was part of Microsoft’s $100 million commitment to construct engineering capability in Africa. The firm deliberate to rent 500 engineers throughout Nairobi and Lagos, Nigeria, giving it entry to native expertise whereas providing African engineers the prospect to work on merchandise used worldwide. The Lagos hub closed in 2024, and Nairobi is now following swimsuit, exiting Microsoft’s engineering enterprise on the continent.

Microsoft might proceed to serve African clients via its gross sales groups, cloud companies, and different operations. But the closure of each engineering centres raises questions concerning the firm’s long-term dedication to creating native technical expertise. The folks shedding their jobs will not be the one ones affected. Governments and universities that handled Microsoft’s funding as proof of Africa’s place within the international know-how trade should now reckon with its withdrawal.

The cuts additionally feed a story that AI will quickly turn out to be central to how companies function. AI firms have raised huge sums on the promise that their know-how will change work, and layoffs attributed to AI give traders another excuse to imagine that promise.

Layoffs have gotten a part of the AI gross sales pitch

Microsoft will not be alone in utilizing AI to elucidate workforce reductions. Amazon eradicated 14,000 company jobs in October 2025 and one other 16,000 in January 2026, whereas Salesforce has linked its AI brokers to a lowered want for buyer assist workers after slicing about 4,000 roles. In February 2026, Salesforce additionally laid off fewer than 1,000 workers throughout a number of features. Across software program, customer support, and different knowledge-based industries, AI has prompted firms to rethink how many individuals they make use of.

Some of those adjustments are actual, on condition that AI instruments can write code, summarise paperwork, reply buyer queries, and deal with repetitive administrative duties. Companies have good motive to check whether or not these instruments can cut back their prices, and a few jobs will disappear as companies automate work. It could be unsuitable to dismiss each AI-related redundancy as a publicity train.

The downside is that firms not often separate the work AI can already carry out from the work they anticipate it to carry out sooner or later. A enterprise would possibly reduce jobs as a result of demand has weakened, groups overlap, or administration desires to enhance margins. AI might contribute to the choice, however it could actually additionally present a handy rationalization for restructuring that will have occurred anyway.

Cutting workers can enhance an organization’s monetary outcomes instantly, whereas the productiveness good points promised by AI might take years to materialise. An organization can cut back its payroll and report higher margins earlier than proving that its AI investments will generate sufficient cash to cowl its prices. The promise of future productiveness can due to this fact assist justify choices whose quick monetary advantages come from using fewer folks.

There can be a business profit to creating AI seem unavoidable. When Microsoft, Amazon, or Salesforce declares cuts linked to AI, different executives face stress to point out they’re making ready for the identical future. Businesses concern falling behind, staff fear about their jobs, and traders look for firms positioned to revenue. The bulletins assist promote AI as a necessity fairly than a know-how whose worth should be judged towards its price.

There isn’t any proof that firms are coordinating layoffs to drive up demand for AI shares. But the language surrounding the cuts can nonetheless profit an trade whose valuations rely upon traders believing that AI will turn out to be indispensable. That is value analyzing, particularly as two of its largest gamers put together to strategy public markets.

The IPO is the place the story will get costly

OpenAI announced a funding round involving $122 billion in dedicated capital in March 2026, valuing the corporate at $852 billion after the funding. Microsoft has committed $13 billion to OpenAI via their partnership since 2019, of which $11.9 billion had been funded by June 2026, according to Microsoft’s annual filing. These figures cowl totally different components of OpenAI’s financing and shouldn’t be handled as separate investments.

Anthropic has attracted equally massive sums, raising $65 billion in May 2026 at a post-money valuation of $965 billion. That similar month, the corporate reported an annualised revenue run rate above $47 billion.

A public itemizing would give the businesses entry to a broader pool of traders and permit some present shareholders to promote their stakes. Investors who backed them privately may realise substantial returns if the market values them at ranges above their earlier funding rounds. The story they promote to public traders might want to justify these valuations.

OpenAI has reported speedy income development, nevertheless it has but to ascertain sustained profitability. Its spending on computing infrastructure and mannequin growth stays excessive, and projections counsel it might not generate optimistic money circulation till 2030. Revenue development alone doesn’t point out whether or not the corporate can earn sufficient to cowl the prices of creating and working its programs.

Anthropic reported $16.8 billion in third-quarter revenue in October 2026 and adjusted profitability for a second consecutive quarter, though its development has slowed from earlier within the yr. Adjusted profitability doesn’t inform traders every little thing concerning the firm’s long-term prices or whether or not it could actually maintain its margins.

Both OpenAI and Anthropic have discovered sturdy demand for their merchandise, and AI already has sensible makes use of in software program growth, analysis, and buyer assist. They nonetheless have to show they will flip that demand into income and justify what traders are paying for them.

The blockchain increase of the 2010s presents a helpful comparability, as traders have been informed the know-how would change finance, agriculture, and provide chains, but many promised purposes by no means reached mainstream use. Blockchain had sensible makes use of, however that didn’t make each firm constructed round it a sound funding. AI may have a far higher business affect, however its potential doesn’t assure that each firm promoting it can succeed.

Microsoft’s African closures don’t show a plan to inflate AI valuations, however they present how the corporate can abandon a long-term funding in native engineering whereas the trade it belongs to asks traders to imagine AI will outline the way forward for enterprise. More than 400 engineers are shedding their jobs, whereas traders are being supplied an opportunity to revenue from the know-how being offered as the way forward for work.

The market ought to decide AI firms by the cash they make, not simply the cash they elevate or the roles their clients reduce. By the time OpenAI and Anthropic attain public markets, traders could have heard lots about AI’s potential to interchange staff. They might want to ask a tougher query about whether or not the companies promising that future could make sufficient cash to justify their valuations.

Kenn Abuya

Senior Reporter, TechCabal

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