The Next Wave: Are layoffs good for AI’s business?

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First published on October 18, 2026

Microsoft ADC offices at Dunhill Towers in Nairobi, Kenya. Image: TechCabal

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Microsoft has shut its Africa Development Centre (ADC) in Nairobi, Kenya, leaving more than 400 engineers without jobs, following the closure of its Lagos engineering operation in May 2024. It has also closed sales offices in Windhoek, Abidjan, Dakar, Accra and Port-Louis. Microsoft says it “remains committed to Kenya”, but its retreat from the places where it once promised to build African engineering talent tells a different story. As the company and its peers pour billions into artificial intelligence (AI), these closures also reinforce a message that benefits the industry selling it. AI is coming for your job, and the companies building it are worth investing in.

The Nairobi decision is difficult to explain through performance alone. Employees familiar with the centre say it had no quality or performance problems, and some received strong appraisal ratings before learning their jobs were at risk. Microsoft has not publicly said poor performance prompted the decision. People close to the matter say about five employees across customer and partner solutions, recruitment, and sales will remain in the affected operation.

Announced in 2019, the centre was part of Microsoft’s $100 million commitment to build engineering capacity in Africa. The company planned to hire 500 engineers across Nairobi and Lagos, Nigeria, giving it access to local talent while offering African engineers the chance to work on products used worldwide. The Lagos hub closed in 2024, and Nairobi is now following suit, exiting Microsoft’s engineering business on the continent.

Microsoft may continue to serve African customers through its sales teams, cloud services, and other operations. But the closure of both engineering centres raises questions about the company’s long-term commitment to developing local technical talent. The people losing their jobs are not the only ones affected. Governments and universities that treated Microsoft’s investment as evidence of Africa’s place in the global technology industry must now reckon with its withdrawal.

The cuts also feed a narrative that AI will soon become central to how businesses operate. AI companies have raised enormous sums on the promise that their technology will change work, and layoffs attributed to AI give investors another reason to believe that promise.

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Layoffs are becoming part of the AI sales pitch

Microsoft is not alone in using AI to explain workforce reductions. Amazon eliminated 14,000 corporate jobs in October 2025 and another 16,000 in January 2026, while Salesforce has linked its AI agents to a reduced need for customer support staff after cutting about 4,000 roles. In February 2026, Salesforce also laid off fewer than 1,000 employees across several functions. Across software, customer service, and other knowledge-based industries, AI has prompted companies to reconsider how many people they employ.

Some of these changes are real, given that AI tools can write code, summarise documents, answer customer queries, and handle repetitive administrative tasks. Companies have good reason to test whether these tools can reduce their costs, and some jobs will disappear as businesses automate work. It would be wrong to dismiss every AI-related redundancy as a publicity exercise.

The problem is that companies rarely separate the work AI can already perform from the work they expect it to perform in the future. A business might cut jobs because demand has weakened, teams overlap, or management wants to improve margins. AI may contribute to the decision, but it can also provide a convenient explanation for restructuring that would have happened anyway.

Cutting staff can improve a company’s financial results immediately, while the productivity gains promised by AI may take years to materialise. A company can reduce its payroll and report better margins before proving that its AI investments will generate enough money to cover its costs. The promise of future productivity can therefore help justify decisions whose immediate financial benefits come from employing fewer people.

There is also a commercial benefit to making AI appear unavoidable. When Microsoft, Amazon, or Salesforce announces cuts linked to AI, other executives face pressure to show they are preparing for the same future. Businesses fear falling behind, workers worry about their jobs, and investors look for companies positioned to profit. The announcements help sell AI as a necessity rather than a technology whose value must be judged against its cost.

There is no evidence that companies are coordinating layoffs to drive up demand for AI stocks. But the language surrounding the cuts can still benefit an industry whose valuations depend on investors believing that AI will become indispensable. That is worth examining, especially as two of its biggest players prepare to approach public markets.

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The IPO is where the story gets expensive

OpenAI announced a funding round involving $122 billion in committed capital in March 2026, valuing the company at $852 billion after the investment. Microsoft has committed $13 billion to OpenAI through their partnership since 2019, of which $11.9 billion had been funded by June 2026, according to Microsoft’s annual filing. These figures cover different parts of OpenAI’s financing and should not be treated as separate investments.

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

A public listing would give the companies access to a broader pool of investors and allow some existing shareholders to sell their stakes. Investors who backed them privately could realise substantial returns if the market values them at levels above their previous funding rounds. The story they sell to public investors will need to justify those valuations.

OpenAI has reported rapid revenue growth, but it has yet to establish sustained profitability. Its spending on computing infrastructure and model development remains high, and projections suggest it may not generate positive cash flow until 2030. Revenue growth alone does not indicate whether the company can earn enough to cover the costs of developing and operating its systems.

Anthropic reported $16.8 billion in third-quarter revenue in October 2026 and adjusted profitability for a second consecutive quarter, although its growth has slowed from earlier in the year. Adjusted profitability does not tell investors everything about the company’s long-term costs or whether it can sustain its margins.

Both OpenAI and Anthropic have found strong demand for their products, and AI already has practical uses in software development, research, and customer support. They still need to prove they can turn that demand into profits and justify what investors are paying for them.

The blockchain boom of the 2010s offers a useful comparison, as investors were told the technology would change finance, agriculture, and supply chains, yet many promised applications never reached mainstream use. Blockchain had practical uses, but that did not make every company built around it a sound investment. AI could have a far greater commercial impact, but its potential does not guarantee that every company selling it will succeed.

Microsoft’s African closures do not prove a plan to inflate AI valuations, but they show how the company can abandon a long-term investment in local engineering while the industry it belongs to asks investors to believe AI will define the future of business. More than 400 engineers are losing their jobs, while investors are being offered a chance to profit from the technology being presented as the future of work.

The market should judge AI companies by the money they make, not just the money they raise or the jobs their customers cut. By the time OpenAI and Anthropic reach public markets, investors will have heard plenty about AI’s ability to replace workers. They will need to ask a harder question about whether the businesses promising that future can make enough money to justify their valuations.

Kenn Abuya

Senior Reporter, TechCabal

Thank you for reading this far. Feel free to email kenn[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.

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