Microsoft has launched another round of layoffs, cutting about 4,800 employees, or roughly 2.1% of its global workforce. The move was announced on July 6, 2026, shortly after the start of the new fiscal year. The heaviest impact falls on the Xbox gaming division and the company’s commercial sales organization. Within Xbox alone, about 1,600 jobs were cut in a single day as part of a broader reset.
Xbox restructuring expands beyond job cuts
Xbox sits at the center of this reorganization. Microsoft has spent heavily on game development and acquisitions in recent years, but hardware sales and subscription revenue have faced pressure, leaving profitability under strain. Alongside staff reductions, Microsoft is moving to sell four Xbox game studios and is evaluating whether to sell a fifth. By the end of the current fiscal year, the overall Xbox headcount is expected to be reduced by about 20%.
Second straight year of July layoffs
This is the second consecutive year Microsoft has opened its fiscal year with major workforce cuts. According to the source material, the company eliminated about 9,100 jobs in July 2025. The latest cuts show that Microsoft is still reshaping resources and trimming costs as it responds to market shifts and pressure on business returns. Beyond gaming, the commercial sales group is also included in the latest restructuring plan.
HR chief says AI is not taking these jobs
The layoffs have triggered familiar questions about whether AI is replacing human workers. In an internal memo, Microsoft Chief People Officer Amy Coleman said the cuts were made in response to changes across the technology sector. She acknowledged that AI has already changed how the company operates and how work gets done, but said a key point should be clear: the jobs eliminated in this round will not be replaced by AI. Her framing was direct: this is a resource reallocation decision tied to a changing business environment.
Redeployments and voluntary retirement plan remain in use
Microsoft is also using internal placement and retirement programs to soften the impact. Over the past year, the company has redeployed more than 4,000 employees into other internal roles, with another 500 transfers completed this month. For U.S. employees, Microsoft had earlier introduced a voluntary retirement program, or VSRP, open to workers whose age plus years of service totals at least 70. The package includes five years of healthcare coverage, severance, and six months of stock vesting. More than 30% of eligible senior employees joined the program.