Microsoft is preparing a third major round of layoffs in a little over a year, with the number of affected employees expected to stay below 5,500. According to a New York Post report citing Business Insider, the cuts could be announced as soon as next week and would focus on sales, consulting, and the Xbox gaming business. The planned reduction would represent about 2.5% of Microsoft’s global workforce of 220,000 employees.
Sales, consulting, and Xbox are expected to bear the brunt
People familiar with the matter said the layoffs will be concentrated in Microsoft’s sales and consulting divisions, along with the struggling Xbox unit. Earlier this year, Microsoft offered a voluntary retirement buyout program to some U.S. employees whose age plus years of service totaled at least 70. Roughly 9,000 employees were eligible, and about one-third accepted the offer, helping keep the number of involuntary job cuts below the 5,500 mark.
Pressure inside Xbox has already become public. Xbox executive Asha Sharma recently said the business is “not in a healthy place.” The report linked that strain to rising hardware costs as AI data center demand consumes more chip supply. Microsoft has raised Xbox hardware prices multiple times, with the latest increase reaching $150. It has also shut down studios and canceled game projects that were still in development.
$190 billion AI spending collides with a sharp stock decline
The layoffs are unfolding as Microsoft continues to commit enormous sums to AI infrastructure. The company has said it plans to spend as much as $190 billion over the coming years on next-generation AI buildout. Investors have reacted badly to that spending profile. Microsoft shares fell 19% in June alone, their worst monthly performance since the dot-com era downturn in the early 2000s.
The concern described in the report goes beyond cost. AI expansion is accelerating at the same time that traditional software tools face a growing risk of disruption. That leaves Microsoft dealing with two pressures at once: heavy capital outlays on one side and possible erosion of established revenue lines on the other. Those tensions are now showing up in staffing decisions and business-unit restructuring.
Three layoff rounds in a year as tech job cuts keep spreading
If the latest cuts go ahead, Microsoft will have completed three large workforce reductions in just over a year. The company cut 6,000 jobs in May last year, then another 9,000 in July, equal to about 4% of its workforce at the time. The next round is expected to come in below 5,500, but the pattern is now hard to miss.
The same pressure is visible across the broader tech sector. A recent report from Challenger, Gray & Christmas said nearly one-third of all layoffs this year have come from technology companies. Through June, AI was the top stated reason for corporate layoffs for a fourth straight month. The source material also said that since 2023, nearly 174,000 jobs worldwide have disappeared because of AI-driven restructuring or role replacement.