Microsoft is undertaking a significant restructuring, announcing plans to lay off 4,800 employees, representing about 2.1% of its global workforce. This follows a previous round of 15,000 job cuts in 2025. The current reductions are primarily concentrated in the company's commercial sales business and the Xbox division. The company previously made efforts to reduce the need for layoffs through a voluntary retirement program, with about 30% of eligible U.S. employees opting in, and by redeploying over 4,000 employees into new roles over the past year.
The Xbox division is facing a major overhaul, described by CEO Asha Sharma as the "biggest restructuring in Xbox history." Approximately 1,600 Xbox employees are being laid off immediately, with a total of 3,200 job reductions, or about 20% of the global Xbox workforce, expected by the end of the fiscal year. Four Xbox game studios will also be spun off to operate independently. Sharma noted in an internal memo that the division has been "operating at margins that are 3-10x lower than comparable platform and publishing businesses," and that studios have been losing $0.64 for every dollar invested.
The broader job cuts at Microsoft are driven by a need to adapt to a rapidly changing tech industry, particularly with the increasing influence of AI. While Amy Coleman, Microsoft's chief people officer, stated that the eliminated roles are not being directly replaced by AI, she acknowledged that "AI is changing how work gets done" and that the company needs "more engineering excellence in the customer space." The company is also investing heavily in its AI infrastructure, including a new $2.5 billion initiative called the Microsoft Frontier Company to embed 6,000 engineers with customers to deploy AI solutions. This shift is resulting in a reduction of traditional sales and consulting roles in favor of more technical, customer-facing positions. These changes come amid pressure from Wall Street to control operating expenses and a 30% stock slide that has erased roughly $1.2 trillion from Microsoft's market value over the past nine months.
