Console and sales divisions face deep cuts as Microsoft moves to streamline for AI-led growth
Nearly 4 percent of Microsoft’s global workforce — around 9,000 employees — are being laid off as the company undertakes its largest job reduction in over two years, according to The Canadian Press.
The cuts affect multiple divisions, including Xbox and sales, and come just one day into the company’s 2026 fiscal year.
Microsoft confirmed the layoffs began Wednesday, with 830 job losses tied to its Redmond, Washington, headquarters, as reported to state officials.
The company stated the layoffs are part of “organizational changes” aimed at positioning teams for success in a “dynamic marketplace,” according to a spokesperson quoted by CNBC.
According to a memo seen by The Canadian Press, Xbox CEO Phil Spencer said the gaming division cuts will allow the business to “focus on strategic growth areas” and that the team would “follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.”
As per CNBC, the layoffs impact workers across different teams, regions, and experience levels.
This marks Microsoft’s second major round of layoffs in 2025 and follows earlier cuts of 6,000 in May and 300 in June. It had already reduced headcount in January by less than 1 percent, citing performance-related decisions.
Microsoft employed 228,000 people as of June 2024. The company did not specify a total number of layoffs but indicated the latest round affects less than 4 percent of that headcount.
According to The Canadian Press, Microsoft has held at least three rounds of job cuts this year, and hiring has likely not offset those reductions.
The layoffs come as Microsoft continues to invest significantly in AI-related infrastructure. According to BNN Bloomberg, the company expected to spend about $80bn on data centres, computer chips, and other infrastructure in its last fiscal year.
Its March-quarter earnings reported nearly $26bn in net income on $70bn in revenue, keeping Microsoft among the most profitable firms on the S&P 500, according to CNBC.
In April, Microsoft CFO Amy Hood stated the company was focusing on “building high-performing teams and increasing our agility by reducing layers with fewer managers.”
The May round of layoffs, which targeted software engineering and product management roles, raised concerns about Microsoft’s AI code-writing tools reducing the need for programming staff.
CEO Satya Nadella said earlier this year that “maybe 20, 30 percent of the code” for certain projects “are probably all written by software,” as per The Canadian Press.
Xbox's headcount reduction follows years of aggressive investment in gaming, including the $75.4bn acquisition of Activision Blizzard in 2023 and a prior $7.5bn purchase of ZeniMax Media.
Many affected game studios are located across North America and Europe.
According to BNN Bloomberg, employees posted on social media that they were seeking new jobs following the cuts.
Wedbush Securities analyst Dan Ives told The Canadian Press that the layoffs appear concentrated in slower-growing parts of the business.
“They’re focused more and more on AI, cloud and next-generation Microsoft and really looking to cut costs around Xbox and some of the more legacy areas,” Ives said.
He added that the company likely overhired in recent years and described the move as part of Nadella’s push for efficiency, which he said is “the name of the game in Wall Street.”
Other software firms such as Autodesk, Chegg, and CrowdStrike have also downsized in 2025, as per CNBC.
ADP, a payroll processing company, reported that the US private sector lost 33,000 jobs in June, falling short of economists’ expectations of a 100,000 gain.
