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 places of work 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 distinct story. As the corporate and its friends pour billions into synthetic intelligence (AI), these closures additionally reinforce a message that advantages the business promoting it. AI is coming for your job, and the businesses constructing it are value investing in.

The Nairobi resolution is tough to clarify by way of efficiency alone. Employees conversant in the centre say it had no high quality or efficiency issues, and a few obtained sturdy appraisal scores earlier than studying their jobs had been in danger. Microsoft has not publicly stated poor efficiency prompted the choice. People near the matter say about 5 staff 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 go well with, exiting Microsoft’s engineering enterprise on the continent.

Microsoft could proceed to serve African prospects by way of its gross sales groups, cloud companies, and different operations. But the closure of each engineering centres raises questions in regards to the firm’s long-term dedication to growing native technical expertise. The folks dropping their jobs usually are not the one ones affected. Governments and universities that handled Microsoft’s funding as proof of Africa’s place within the world expertise business should now reckon with its withdrawal.

The cuts additionally feed a story that AI will quickly change into central to how companies function. AI corporations have raised huge sums on the promise that their expertise will change work, and layoffs attributed to AI give buyers one more reason to imagine that promise.

Layoffs have gotten a part of the AI gross sales pitch

Microsoft will not be alone in utilizing AI to clarify 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 diminished want for buyer help employees after slicing about 4,000 roles. In February 2026, Salesforce additionally laid off fewer than 1,000 staff throughout a number of features. Across software program, customer support, and different knowledge-based industries, AI has prompted corporations to rethink how many individuals they make use of.

Some of those adjustments are actual, provided that AI instruments can write code, summarise paperwork, reply buyer queries, and deal with repetitive administrative duties. Companies have good purpose 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 incorrect to dismiss each AI-related redundancy as a publicity train.

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

Cutting employees can enhance an organization’s monetary outcomes instantly, whereas the productiveness positive aspects promised by AI could 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 selections whose fast monetary advantages come from using fewer folks.

There can be a business profit to creating AI seem unavoidable. When Microsoft, Amazon, or Salesforce proclaims cuts linked to AI, different executives face stress to point out they’re making ready for the identical future. Businesses concern falling behind, employees fear about their jobs, and buyers look for corporations positioned to revenue. The bulletins assist promote AI as a necessity somewhat than a expertise whose worth should be judged in opposition to its price.

There isn’t any proof that corporations are coordinating layoffs to drive up demand for AI shares. But the language surrounding the cuts can nonetheless profit an business whose valuations rely upon buyers believing that AI will change into 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 by way of 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 elements of OpenAI’s financing and shouldn’t be handled as separate investments.

Anthropic has attracted equally giant sums, raising $65 billion in May 2026 at a post-money valuation of $965 billion. That identical 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 buyers and permit some current 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 buyers might want to justify these valuations.

OpenAI has reported speedy income progress, but it surely has but to ascertain sustained profitability. Its spending on computing infrastructure and mannequin growth stays excessive, and projections recommend it could not generate constructive money movement till 2030. Revenue progress alone doesn’t point out whether or not the corporate can earn sufficient to cowl the prices of growing 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 progress has slowed from earlier within the yr. Adjusted profitability doesn’t inform buyers every thing in regards to 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 help. They nonetheless must show they will flip that demand into income and justify what buyers are paying for them.

The blockchain increase of the 2010s provides a helpful comparability, as buyers had been advised the expertise would change finance, agriculture, and provide chains, but many promised functions 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 larger business influence, however its potential doesn’t assure that each firm promoting it would 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 business it belongs to asks buyers to imagine AI will outline the way forward for enterprise. More than 400 engineers are dropping their jobs, whereas buyers are being provided an opportunity to revenue from the expertise being offered as the way forward for work.

The market ought to decide AI corporations by the cash they make, not simply the cash they increase or the roles their prospects reduce. By the time OpenAI and Anthropic attain public markets, buyers may have heard loads about AI’s skill to exchange employees. They might want to ask a more durable 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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