• by Laurie Sullivan  @lauriesullivan, May 16, 2024

As tensions between the U.S. and China escalate, Microsoft is asking hundreds of its China-based employees working on artificial intelligence (AI) and cloud-computing projects to consider transferring outside the country.

AI and cloud computing are two areas within Microsoft that have major support behind advertising and marketing. 

For the quarter that ended March 31, 2024, Microsoft announced that revenue had jumped 17% to $61.9 billion and attributed cloud computing, in part, to the increase. 

“This quarter Microsoft Cloud revenue was $35.1 billion, up 23% year-over-year, driven by strong execution by our sales teams and partners,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

A gain in cloud services revenue was seen in nearly every operating unit at Microsoft during the quarter.

For example, Office Commercial products and cloud services revenue rose 13%, driven by Office 365 Commercial revenue growth of 15%. Office Consumer products and cloud services revenue increased 4% and Microsoft 365 Consumer subscribers grew to 80.8 million. 

Dynamics products and cloud services revenue rose 19%, driven by Dynamics 365 revenue growth of 23%.

Microsoft's push to relocate employees as the Biden administration seeks to put tighter restrictions around Beijing's capability and desire to develop high-tech AI is not entirely new, but has been pushed in recent days. 

Last year, The White House proposed new rules that would require Microsoft and other U.S. cloud-computing companies that sell access to advanced AI computing power to get licenses for Chinese customers.

The staff offered relocation assignments, mostly Chinese nationalist engineers, were offered the opportunity to transfer to U.S., Ireland, Australia and New Zealand, people familiar with the matter told The Wall Street Journal. About 700 to 800 people were given the offer. Most were involved in machine learning and other cloud-computing tasks.

Over the years, Microsoft has also build a large AI business in China. Estimates put the company's employment in the country at about 7,000 engineers in its Asia-Pacific R&D Group, with most of them based in China. Many participate in the company’s global research and development for its core products, including AI.

A Microsoft spokesperson told the WSJ internal opportunities were a normal part of business, and the company remains committed to its operations in China.

Microsoft denies rumors that its AI team in China has been asked to collectively relocate to the United States or Australia, according to China Daily, admitting thought that a small number of employees in China have the opportunity to choose international rotations. Employees can opt for the rotation or continue in their current positions.