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 special 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 price investing in.

The Nairobi choice is tough to elucidate by efficiency alone. Employees conversant in the centre say it had no high quality or efficiency issues, and a few obtained robust 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 staff throughout buyer and accomplice 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 prospects by 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 individuals 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 world expertise business should now reckon with its withdrawal.

The cuts additionally feed a story that AI will quickly grow to be central to how companies function. AI corporations have raised monumental sums on the promise that their expertise will change work, and layoffs attributed to AI give traders one more reason to consider that promise.

Layoffs have gotten a part of the AI gross sales pitch

Microsoft isn’t 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 employees after reducing about 4,000 roles. In February 2026, Salesforce additionally laid off fewer than 1,000 staff throughout a number of capabilities. 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 modifications 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 scale back their prices, and a few jobs will disappear as companies automate work. It can be fallacious to dismiss each AI-related redundancy as a publicity train.

The downside 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 would possibly lower jobs as a result of demand has weakened, groups overlap, or administration desires to enhance margins. AI might contribute to the choice, however it might additionally present a handy rationalization for restructuring that may have occurred anyway.

Cutting employees can enhance an organization’s monetary outcomes instantly, whereas the productiveness positive aspects promised by AI might take years to materialise. An organization can scale 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 subsequently assist justify selections whose instant monetary advantages come from using fewer individuals.

There can be a business profit to creating AI seem unavoidable. When Microsoft, Amazon, or Salesforce broadcasts cuts linked to AI, different executives face strain to point out they’re getting ready for the identical future. Businesses concern falling behind, employees fear about their jobs, and traders look for corporations positioned to revenue. The bulletins assist promote AI as a necessity moderately than a expertise whose worth should be judged towards 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 traders believing that AI will grow to be indispensable. That is price inspecting, particularly as two of its greatest 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 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 traders and permit some present shareholders to promote their stakes. Investors who backed them privately might 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 fast income development, however it has but to ascertain sustained profitability. Its spending on computing infrastructure and mannequin improvement stays excessive, and projections counsel it might not generate optimistic money movement till 2030. Revenue development 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 development has slowed from earlier within the 12 months. Adjusted profitability doesn’t inform traders every thing in regards to the firm’s long-term prices or whether or not it might maintain its margins.

Both OpenAI and Anthropic have discovered robust demand for their merchandise, and AI already has sensible makes use of in software program improvement, 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 growth of the 2010s gives a helpful comparability, as traders have been instructed 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 might have a far better business impression, however its potential doesn’t assure that each firm promoting it’s going to 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 traders to consider AI will outline the way forward for enterprise. More than 400 engineers are shedding their jobs, whereas traders 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 elevate or the roles their prospects lower. By the time OpenAI and Anthropic attain public markets, traders can have heard loads about AI’s capability to exchange employees. 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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