Microsoft plans to lay off thousands as AI spending reshapes its workforce

Microsoft is preparing another round of job cuts that could affect thousands of employees, according to a new report. The layoffs, which could be announced as early as next week, come as the software giant continues to pour tens of billions of dollars into artificial intelligence infrastructure, adding to a growing trend across Big Tech in which companies are reducing headcount in some areas to fund massive AI investments.

Business Insider reported on Tuesday that Microsoft plans to cut fewer than 2.5% of its global workforce, citing people familiar with the matter. The reductions are expected to hit thousands of employees across several parts of the company, including sales, consulting, and the Xbox gaming division.

“Microsoft is planning to announce job cuts soon as the tech giant continues efforts to control costs,” Business Insider reported, citing people familiar with the matter.

“This round is expected to be smaller than similar layoffs last year. This time, the cuts are projected to be less than 2.5% of the company’s 220,000-person workforce, the people added. They asked not to be identified discussing sensitive matters,” the reported added.

Microsoft declined to comment on the report.

The company employed roughly 228,000 full-time workers as of June 30, 2025, according to its latest annual filing with the U.S. Securities and Exchange Commission. A workforce reduction of under 2.5% would still result in thousands of job losses.

Microsoft plans fresh layoffs affecting thousands as AI spending climbs

The reported layoffs follow a series of changes inside Microsoft’s gaming business. Earlier this month, Bloomberg reported that Xbox was preparing significant job cuts alongside reductions to marketing and other budgets. The gaming division has faced mounting pressure after Microsoft raised Xbox console prices globally, citing higher costs and broader economic pressures.

“The cuts are expected to impact thousands of roles, including sales and consulting, in addition to jobs at the Xbox gaming division,” Business Insider noted, citing the people.

Separate reporting from The Information said Microsoft has been evaluating strategic options for Xbox, including a potential spinoff or restructuring into a wholly owned subsidiary.

The latest move would mark another major workforce reduction for Microsoft in less than a year. In July 2025, the company announced plans to eliminate nearly 4% of its workforce, one of its largest rounds of layoffs in recent years.

Microsoft’s latest restructuring reflects a broader shift taking place across the technology industry. Many of the sector’s biggest companies are trimming payroll and reorganizing teams while committing record amounts of capital to AI infrastructure, data centers, and specialized chips.

Meta has already announced plans to reduce its workforce by roughly 10% this year. Amazon has outlined plans to eliminate about 16,000 jobs globally as part of its own cost-cutting efforts.

For Microsoft, the latest reported layoffs underscore how AI has become the company’s top strategic priority. The company continues to invest heavily in the infrastructure needed to support advanced AI models and cloud services, reshaping its workforce as it reallocates resources to support that long-term strategy.