Microsoft’s Czech profits soar despite workforce cuts and AI pivot

American tech giant Microsoft has approved the distribution of over CZK 500 billion in profits from Czech operations, highlighting the company’s strong financial position despite recent workforce reductions and shifting market demands.

The decision, finalized in December and published in the Czech Commercial Register, reflects Microsoft’s ongoing profitability and strategic regional presence, even as local sales have declined. The company’s Czech branch reported a revenue drop in the 2023/24 financial year. However, profits rose slightly to CZK 333.5 million, compared to CZK 330 million the year before.

Despite the profit surge, Microsoft’s Czech office has streamlined its workforce, cutting nearly 100 positions, including managerial roles. By mid-2024, the number of employees stood at 556, down from 643 the previous year. Skype Czech Republic also experienced a modest decline, with its workforce decreasing by 10 to 695 employees. Microsoft remains one of the largest foreign employers in Prague.

Microsoft has identified artificial intelligence (AI) as a key growth area in Czechia. Cloud services, including Azure, Microsoft 365, and Dynamics 365, accounted for over 75 percent of the company’s local turnover last year. Major clients include Plzeňský Prazdroj, O2, Česká spořitelna, and various public administration entities.

“We expect AI technologies to be the fastest-growing services segment in the next fiscal year,” Microsoft noted in its annual report. The integration of AI and Copilot tools into its product suite is driving rapid adoption among customers, reinforcing Microsoft’s commitment to innovation.

Cloud storage is increasingly important for the U.S. giant, especially amid the rise of artificial intelligence (AI). Microsoft’s cloud services, including Azure, Microsoft 365, and Dynamics 365, accounted for over 75 percent of the company’s turnover in the Czech Republic last year. Major clients include Plzeňský Prazdroj, O2, Česká spořitelna, and various public administration entities.

The company has also capitalized on the hybrid work model and growing demand for AI technologies. “We expect AI technologies to be the fastest growing services segment in the next fiscal year,” Microsoft noted in its annual report. AI and Copilot tools have been integrated into most of the company’s offerings, facilitating rapid adoption among customers.

Despite its success, Microsoft has faced challenges in the Czech Republic. In 2022, the company canceled plans for a large data center in the region, citing insufficient access to emission-free energy. The project was relocated to Scandinavia.

In late summer last year, Microsoft’s Vice Chairman and President Brad Smith visited Prague, meeting with Czech President Petr Pavel and then-Minister of Industry and Trade Jozef Síkela. During the visit, Smith announced Microsoft’s plans to establish an AI center in the Czech Republic in the near future.

Microsoft, which has operated in the Czech Republic since 1992, maintains close ties with its Irish branch, leveraging Ireland’s favorable tax environment for European technology firms. As AI adoption continues to grow, the company’s strategic investments in Czechia could shape the country’s tech landscape for years to come.