Microsoft layoffs to cut thousands of jobs next week as AI investment reshapes workforce priorities

Microsoft set to cut thousands of jobs next week, spanning Xbox, sales and consulting

Microsoft is preparing to cut thousands of jobs next week, continuing to rein in operating costs as the company pours unprecedented sums into AI infrastructure. Business Insider broke the news Tuesday afternoon, saying that the cuts will impact less than 2.5% of the company's global workforce of about 220,000 people. It includes not just Xbox, where cuts have been signaled for weeks, but also layoffs in sales and consulting. GeekWire confirmed the details of the report with a person familiar with the company's plan. Microsoft isn't commenting on the report. The timing follows a familiar pattern. Microsoft often restructures its operations around the close of its fiscal year on June 30, and the cuts would come just as the new year begins. The reductions were bigger last year. Microsoft laid off more than 15,000 people in two rounds of cuts a few weeks apart: about 6,000 in May 2025, then around 9,000 (roughly 4% of the company at the time) in early July 2025. One difference this year: Microsoft's first-ever voluntary retirement program. About a third of the approximately 8,750 eligible U.S. employees took the buyout, reportedly allowing the company to cut a smaller share of its workforce through layoffs than a year ago. The company is on pace to spend more than $100 billion building AI and cloud infrastructure in the fiscal year that just ended -- up from $88.7 billion the year before -- with about two-thirds going to the chips that power AI. Microsoft shares closed Tuesday at $373.02, down 19% over the past month and near a 52-week low, as Wall Street questions whether its heavy AI spending will pay off. The layoffs come amid a broader wave of restructuring across the tech industry, which has shed more jobs than any other sector this year. U.S. tech companies have announced 123,653 cuts so far in 2026, up 66% from the same stretch of 2025, according to a report from outplacement firm Challenger, Gray & Christmas. Across all sectors, not just tech, AI was the most commonly cited reason for job cuts in May -- the third straight month it has led the list. The 38,579 cuts attributed to AI were the most in any month since Challenger began tracking the cause in 2023. For the year, AI has been linked to 87,714 cuts, already surpassing the 54,836 attributed to it in all of 2025.

Microsoft to Announce Fresh Layoffs Impacting Thousands as AI Investment Surge Reshapes Workforce: Report

Microsoft Reportedly Preparing Smaller Layoffs Than Last Year The layoffs are likely to affect less than 2.5% of Microsoft's roughly 220,000-person global workforce. The company could announce the reductions as early as next week, though the timing may change. Some employees whose roles are eliminated could be offered other positions within the company immediately, according to one of the people cited in the report. The expected layoffs are said to primarily target sales, consulting and Microsoft's Xbox gaming division. Microsoft did not immediately respond to Benzinga's request for comments. AI Investment And Cost Controls Drive Workforce Changes The latest workforce reduction comes as Microsoft continues to increase spending on AI infrastructure and services while looking for ways to control operating costs. Earlier this year, Microsoft introduced a voluntary retirement program for eligible U.S. employees with long service histories. Approximately 9,000 employees qualified for the program, representing about 7% of the company's U.S. workforce, the report said. Roughly one-third of eligible employees accepted the buyout offer, reducing the need for deeper layoffs compared with last year, according to one person familiar with the matter. Layoffs Surge As AI Infrastructure Investments Accelerate The tech industry has seen a sharp rise in layoffs as companies ramp up spending on AI infrastructure, with more than 81,000 jobs eliminated during the first quarter of 2026. Several technology companies have linked recent workforce reductions to their growing adoption of AI. However, not everyone believes AI is already the primary driver of widespread job cuts. In May, Nvidia Corp. (NASDAQ:NVDA) CEO Jensen Huang criticized executives who attribute layoffs to AI. Huang described such explanations as "lazy" and argued that companies have not yet deployed AI at a scale that would justify replacing large segments of their workforce. Price Action: Microsoft Corp. shares closed 1.21% higher at $373.02 on Tuesday and gained an additional 0.68% to $375.55 in after-hours trading, according to Benzinga Pro. According to Benzinga Edge Rankings, Microsoft ranks in the 90th percentile for Quality, although its shares have delivered negative returns across the short, medium and long-term time frames. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Microsoft to slash thousands of jobs as AI spending concerns fuel third major layoff round in a year: report

Microsoft is reportedly planning yet another round of layoffs that will slash thousands of roles next week in an effort to cut costs, as concerns about out-of-control AI spending mount. Less than 2.5% of the company's 220,000-person workforce - or fewer than 5,500 workers - will be axed from the sales and consulting divisions, as well as Xbox's gaming unit, according to Business Insider. The Redmond, Wash.-based software giant plans to announce the layoff round next week, just after the start of its new fiscal year on Wednesday, though the timing could change, sources told the outlet. Some impacted employees will be offered new roles within the company immediately. Microsoft declined to comment. It would mark its third major round of layoffs in just over a year, after slashing 6,000 jobs last May and another 9,000 - or 4% of its workforce - last July. Amid the rapid rise of AI, the company has been facing both concerns that it's spending too much on the new tech - with commitments of $190 billion on new infrastructure over the coming years - and fears that bots could render traditional software tools obsolete. Shares in Microsoft tanked 19% in June for the stock's worst month since the dot-com crash of the early 2000s. News of additional layoffs comes as little surprise after Microsoft earlier this year launched a voluntary retirement buyout round for US employees whose years of employment and age are 70 or higher when added together. About a third of the company's 9,000 eligible workers took the offer, allowing Microsoft to cut fewer roles in this year's expected layoff round, a source told Business Insider. Layoffs have also been anticipated in Microsoft's gaming unit, after new Xbox CEO Asha Sharma called for a "resetting" of the company," saying it was "not in a healthy spot" amid declining revenue. Xbox has spent the past two years closing studios, canceling new game releases and raising prices on its consoles as skyrocketing data center demand for chips sends component prices higher. Last week, Apple blamed chip shortages as it hiked prices for its computers, tablets and home devices by as much as $500. Xbox quickly followed suit with its third price hike on hardware since late 2025, raising prices by $150 across its suite of gaming consoles. So far this year, nearly a third of all job cuts have hit the tech sector - and AI came in as the leading reason for announced layoffs in June for the fourth month in a row, according to a Challenger, Gray & Christmas report released Wednesday. "The pace of layoffs cooled considerably in June, similar to plans last June, and as is typical for summer months," Andy Challenger, the firm's workplace expert and chief revenue officer, said in a statement. "That said, the cuts we are seeing remain concentrated in technology, and artificial intelligence continues to reshape how companies think about headcount." Since 2023, when AI first emerged as a driving force in layoffs, the new tech has been cited in 173,568 job cut announcements, according to Challenger.

Microsoft's Next Layoffs Could Reshape Xbox Gaming Division as 5,700 Jobs on the Line

Microsoft is reportedly preparing another round of job cuts that could affect nearly 2.5% of its workforce. The move may once again impact Xbox as the company shifts more attention toward artificial intelligence. . Multiple reports indicate that the company is again planning to reduce around 2.5% of its global workforce, affecting sales, consulting, and the Xbox gaming division. Interestingly, the current global employee count of the company is around 228,000. Therefore, even a 2.5% reduction will make a significant number of people lose their jobs. It will be one of the major workforce reductions at Microsoft after the . While Microsoft has not officially confirmed which teams will be affected, the gaming division is suspected to become the most impacted one. Xbox has already gone through major changes since Microsoft completed its Activision Blizzard deal. Some studios have closed, projects have been canceled, and several teams have been reorganized. Recent reports even indicate that the company is about to close Arkane Studios, putting a full stop to Marvel's Blade development. These reports have arrived at a time when Microsoft is investing heavily in artificial intelligence. The company has committed billions of dollars to AI infrastructure, cloud services, and new software. So, many industry experts believe AI has become Microsoft's biggest priority. Also Read: If Xbox teams are included in the , it could point to a broader change in Microsoft's gaming strategy. Instead of growing through more acquisitions or larger development teams, the company may focus on making existing studios more efficient. Services such as Game Pass are still expected to remain at the center of Xbox's plans. Microsoft is unlikely to move away from gaming altogether. It still owns some of the industry's biggest franchises. However, the latest reports suggest the company's biggest investments are now going toward AI. For Xbox, that could mean a stronger focus on careful spending instead of rapid growth.