Microsoft’s Severance Plan and OpenAI Trial Collide Ahead of a Defining Earnings Report

Microsoft offers 8,700 US employees buyouts to fund record AI spending; Michael Burry buys the dip amid legal risks from Elon Musk's OpenAI trial.

Nearly 8,700 Microsoft employees in the US have been offered buyouts under the company’s first voluntary severance program, even as the tech giant pours record sums into artificial intelligence. The move, announced on April 23, is not a contradiction but a calculated reallocation of resources — one that arrives just days before a quarterly earnings report that could reset the narrative around the stock.

The buyout is governed by a “Rule of 70” formula: an employee’s age plus years of service must total at least 70 to qualify. The offer extends up to the senior director level, but explicitly excludes staff in AI and Copilot teams, as well as sales employees on variable compensation plans. Eligible workers will receive details on May 7 and have 30 days to decide. While final severance terms have not been disclosed, the 2023 package — 12 weeks of base salary plus two weeks per year of service — serves as a benchmark.

The headcount reduction is directly tied to Microsoft’s AI ambitions. The company plans to spend roughly $145 billion this fiscal year on AI and cloud infrastructure, with $37.5 billion deployed in the last quarter alone to expand Azure data centers and deepen OpenAI integration. That spending spree has weighed on investor sentiment. On the day of the announcement, Microsoft shares fell nearly 4%. The stock now trades at €356.20, roughly 24% below its July 2025 record high and down almost 12% year to date.

Burry Sees Value in the Dip

Michael Burry, the investor who famously bet against subprime mortgages before the 2008 financial crisis, has opened a new position in Microsoft. In a Substack post, he explained that a late-April selloff in software stocks — triggered by disappointing forecasts from IBM and ServiceNow — created an opportunity. Burry said he conducted a “forensic” analysis and concluded that concerns over AI-driven demand shifts in enterprise software were overblown.

His portfolio reveals a clear conviction with a hedge. Alongside Microsoft, Burry added to stakes in MSCI, PayPal, and Adobe, while holding put options on the QQQ ETF, Nvidia, and the iShares Semiconductor ETF. Those hedges now account for roughly 5% of his portfolio. The valuation case is straightforward: Microsoft’s forward P/E stands at about 26, well below its five-year median of 34. The stock’s relative strength index of 26.7 signals oversold territory.

OpenAI Trial Adds Legal Risk

A separate overhang is playing out in a federal courtroom in Oakland, where Elon Musk’s lawsuit against OpenAI began this week. A judge previously dismissed Musk’s fraud claims, leaving two counts: breach of a charitable trust relationship and unjust enrichment. Microsoft is not a bystander — the company was granted five hours of speaking time after surviving a motion to dismiss claims of aiding a fiduciary duty breach.

The stakes are high. If Musk prevails, OpenAI’s planned conversion to a for-profit entity could be reversed, potentially jeopardizing Microsoft’s exclusive licensing agreement. OpenAI accounts for roughly 45% of Microsoft’s outstanding performance obligations — a concentration that has increasingly drawn investor scrutiny. A verdict is expected by the end of May 2026.

Earnings Week Looms

Microsoft reports fiscal third-quarter results on April 29. The consensus calls for revenue of $81.4 billion, a 16% increase year over year, with earnings per share of $4.07. Azure growth is expected to land between 37% and 38% in constant currency.

Analyst sentiment remains constructive but cautious. Morgan Stanley reiterated an “Overweight” rating with a $650 price target, citing strong CIO survey data and improved GPU availability. Oppenheimer, however, cut its target from $630 to $515 on April 27, flagging AI-related risks to the Microsoft 365 ecosystem and rising competitive pressure — though it maintained an “Outperform” rating.

Internationally, Microsoft continues to expand. A $25 billion Australian dollar investment in cloud infrastructure and the new “Microsoft Elevate” initiative in Malaysia underscore a strategy of cutting costs at home while spending aggressively abroad. The coming days will test whether that bet — and the stock’s recent slide — have created a buying opportunity or a value trap.