Microsoft is reportedly preparing another round of layoffs that could affect thousands of employees across sales, consulting, and Xbox, as the company continues to control costs while investing heavily in artificial intelligence infrastructure.
TL;DR
- Microsoft may cut less than 2.5% of its workforce, according to reports.
- The reductions are expected to affect sales, consulting, and Xbox roles.
- Microsoft has not officially confirmed the layoffs and declined to comment on the report.
- The move comes as Microsoft keeps pouring money into AI and cloud infrastructure.
Microsoft is reportedly planning to announce a fresh round of job cuts, with the layoffs expected to impact thousands of roles across sales, consulting, and its Xbox gaming division.
According to Business Insider, the cuts are expected to affect less than 2.5% of Microsoft’s workforce. The report pegged Microsoft’s current workforce at around 220,000 employees, while Microsoft’s latest annual report listed approximately 228,000 full-time employees as of June 30, 2025.
The layoffs could be announced as early as next week, although the exact timing may change. Some affected employees may also be offered new roles immediately.
Reuters reported the same details, citing Business Insider, but said it could not immediately verify the report. Microsoft declined to comment on the matter, according to Reuters.
GeekWire also reported that it confirmed details of the planned cuts with a person familiar with Microsoft’s plans. The outlet noted that the timing follows Microsoft’s usual pattern of restructuring around the start of its fiscal year, which begins on July 1.
The reported job cuts also follow a bigger workforce reduction cycle. Microsoft cut around 6,000 roles in May 2025 and another 9,000 employees in July 2025, representing roughly 4% of its workforce at the time.
This year’s layoffs are expected to be smaller, partly because Microsoft earlier offered a voluntary retirement program to eligible U.S. employees. Business Insider reported that about one-third of eligible employees took the buyout, helping reduce the scale of forced cuts.
Why Is Microsoft Cutting Jobs?
The bigger story here is Microsoft’s balancing act.
On one side, the company remains one of the biggest winners of the AI boom. In its fiscal 2026 third-quarter results, Microsoft reported revenue of $82.9 billion, up 18%, while operating income rose 20% to $38.4 billion. Microsoft Cloud revenue reached $54.5 billion, up 29%.
On the other side, AI is becoming expensive to scale. Microsoft said its gross margin percentage
decreased due to continued investments in AI infrastructure and growing AI product usage. It also said operating expenses increased 9%, driven by investments in research and development compute capacity, AI talent, and data.
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According to CEO Satya Nadella, “Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.”
Xbox also appears to be part of the restructuring. Microsoft’s latest quarterly results showed Xbox content and services revenue declined 5%, while overall gaming revenue decreased 7%.
The reported cuts suggest Microsoft is still shifting money and manpower toward AI, cloud, and higher-priority growth areas. For employees, that means more uncertainty. For investors, it signals Microsoft is trying to prove that its AI spending can keep delivering growth without letting costs run too high.
