Microsoft Chairman and CEO Satya Nadella on Wednesday said that the company will be "making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3 (third quarter)".
Microsoft currently has more than 220,000 employees, and this round of layoffs affects around 5 per cent of its workforce.
Some employees will be notified on Wednesday, but the entire 10,000 layoffs should be completed by the end of March, Nadella said.
In a blog post, Nadella said that it is important to note that "while we are eliminating roles in some areas, we will continue to hire in key strategic areas".
"We know this is a challenging time for each person impacted. The senior leadership team and I are committed that as we go through this process, we will do so in the most thoughtful and transparent way possible," said the Microsoft CEO.
The company had laid off around 1,000 employees late last year.
Nadella said that organisations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.
"We will align our cost structure with our revenue and where we see customer demand," he said.
He said that Microsoft is "taking a $1.2 billion charge in Q2 related to severance costs, changes to our hardware portfolio, and the cost of lease consolidation as we create higher density across our workspaces".
"We will treat our people with dignity and respect, and act transparently. These decisions are difficult, but necessary. They are especially difficult because they impact people and people's lives - our colleagues and friends," said the Indian-origin Microsoft CEO.
"The US-benefit-eligible employees will receive a variety of benefits, including above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, career transition services, and 60 days' notice prior to termination, regardless of whether such notice is legally required," he announced.
Benefits for employees outside the US will align with the employment laws in each country.
Microsoft is set to announce its fiscal 2023 second quarter earnings on January 25.
The tech giant joins Amazon and Meta in massive tech layoffs amid the deepening funding winter amid global uncertainties.