Microsoft to Cut 4,800 Jobs Globally, Including in Australia

Australian employees of Microsoft will be caught up in the technology giant's latest round of global lay-offs, ABC News understands.

Microsoft announced it would cut 4,800 jobs, or ​about 2.1 per cent of its global workforce.

Microsoft Australia employs about 3,000 staff across six offices. It is not known which divisions or locations will be impacted in Australia.

Big Tech's historic AI outlays, set to top $1 trillion this year, are piling pressure on companies to show returns from the technology and offset the rising cost of rolling it out across their businesses.

Amazon and Meta Platforms have also laid off ​thousands of employees this year globally.

In Australia, earlier this year Atlassian announced nearly 500 jobs would go from its local workforce, while software firm WiseTech Global said it planned to cut about 2,000 jobs as AI replaced manual software coding.

Microsoft's chief people officer Amy Coleman, however, told employees in a memo that "the roles eliminated today are not being replaced by AI".

Xbox overhaul leads to 1,600 immediate lay-offs

Announcing the global changes, Microsoft said it was overhauling its Xbox gaming business and divesting up to five studios as it looks to ‌boost returns after years of heavy investment in the division.

The restructuring of its gaming division will involve 3,200 job cuts, including laying off 1,600 employees on Monday (US time).

Despite spending tens of billions of dollars to expand Xbox, including its blockbuster acquisition of Activision Blizzard, Microsoft has struggled to narrow the gap with Sony's PlayStation, and Nintendo, prompting a broader rethink of ​the gaming business.

The company has increasingly shifted its strategy toward distributing its games across more platforms rather than relying on console-exclusive titles ​to drive Xbox hardware sales.

The Xbox restructuring will involve divestment of four studios, Xbox's new head, Asha Sharma, said in ⁠a note to employees.

"South of Midnight producer Compulsion Games and 'Psychonauts' maker Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will ​be spun off to grow 'Senua' and 'State of Decay 3'," Sharma said.

The management of Arkane Studios, which developed Dishonored and is currently working on a game based on ​Marvel Comics character Blade, has started consultations with its workers' union in France to review options, she added.

Burgeoning AI spend

"That [targeted cuts] makes the announcement read more like portfolio reallocation and operating discipline than a fresh ‌catalyst for ⁠the stock," said Parth Talsania, CEO of Equisights Research.

"In the near term, the market is likely to reward Microsoft less for headcount reductions and more for evidence that AI monetisation is scaling faster than AI-related costs."

The software giant earlier this year offered voluntary buyouts to about 7 per cent of its US ​workforce, or about 9,000 employees.

Microsoft often ​trims jobs near the end of ⁠its fiscal year in June as it sets spending plans for the new year.

"By keeping its headcount down they have been able to ​accelerate revenue growth while maintaining the same margins," said Gil Luria, managing director of DA Davidson.

Booming AI demand has ​powered growth at ⁠Microsoft's Azure cloud-computing business, which was the exclusive seller of OpenAI's models until April, but the mounting cost of building data centres to run those services is squeezing its cash flows.

The company, expected to report results later this month, had in April forecast quarterly Azure sales above Wall Street estimates, but also issued a $US190 billion ⁠spending projection ​for 2026 that massively surpassed expectations.

AI tools that can increasingly automate routine business tasks have ​also emerged as a threat to its lucrative software business, while a surge in memory chip prices driven by data centre demand has forced Microsoft to raise Xbox console prices at a ​time when demand for the console was already soft.