Microsoft Prepares for New Round of Layoffs Amid Cost-Cutting and AI Investments

Microsoft is preparing to announce another round of layoffs as part of the company’s efforts to rein in costs, according to a report by Business Insider. The job cuts are expected to affect professionals in the sales, consulting and roles within the Xbox gaming division. While the scale will be smaller than last year’s reductions, thousands of positions could be eliminated. This latest round of layoffs is said to impact less than 2.5% of Microsoft’s 220,000-person workforce, compared to last year’s larger layoffs that saw 6,000 jobs cut in May and another 9,000 in July, about 4% of staff. As per the report by BI, some of the affected employees are now being offered new roles at the company.

The layoffs are expected to be announced next week, though the exact timing could shift. Historically, Microsoft has made workforce adjustments around the start of its fiscal year on July 1. The move underscores the company’s push to control expenses as it ramps up AI investments, even as Wall Street expresses concern that AI could disrupt traditional software services. Microsoft’s stock has fallen about 17% in the past month.

Earlier this year, Microsoft introduced a voluntary retirement program for U.S. employees level 67 and below who had 70 years of age and service. Nearly one-third of the 9,000 eligible employees accepted the buyout, allowing Microsoft to reduce headcount without repeating last year’s scale of layoffs. Sales employees with commission-based pay were excluded from the program. This is the first voluntary retirement program in Microsoft's 51-year history. The company said last month it will take a $900 million charge in the current quarter to fund the buyouts. About 7 percent of Microsoft's US workforce, or roughly 8,750 people, are eligible. The formula is simple: add your age to your years of service, and if the total is 70 or more, the offer is on the table. Employees get 30 days to decide.

Layoffs in the Xbox unit have been anticipated since new gaming CEO Asha Sharma circulated a memo calling for a “reset” of the business. The division is expected to be among those impacted in the upcoming cuts. The cuts, expected shortly after Microsoft's fiscal year ends June 30, would be the first major restructuring under Sharma, who took over from longtime Xbox chief Phil Spencer in February. The Verge, citing people familiar with the plans, separately reported the cuts could extend to closing or reshaping one of Xbox's owned studios. The scale of the layoffs has not been confirmed. Giant Bomb has floated a figure of around 1,000, though neither Bloomberg nor Microsoft has corroborated it. Microsoft declined to comment. Shortly before Bloomberg's report went live, Sharma and Xbox chief content officer Matt Booty sent a memo to staff laying out what they called five "realities" the business has to navigate. The note, later published on Xbox Wire, is unusually blunt for a company-wide message.