Microsoft on Monday announced another round of job cuts, saying it will eliminate around 4,800 positions, or about 2.1% of its global workforce, reported Reuters. The company said the move is part of a broader restructuring effort aimed at preparing the business for long-term growth and improving operational efficiency.
The announcement affects employees across different parts of the company, including its gaming business. Microsoft said that the decision is not linked to replacing workers with artificial intelligence. “Roles eliminated today are not being replaced by AI,” it said, as reported by Reuters.
The company also said over 30% of eligible employees chose to take part in its recent voluntary retirement programme. Microsoft added that it has redeployed thousands of workers into new positions over the past year. “More than 30% of eligible employees chose to participate in our recent voluntary retirement program,” it stated.
The announcement comes as technology companies continue to spend billions of dollars on artificial intelligence while reviewing costs across their businesses. Industry spending on AI infrastructure is expected to cross $700 billion this year, putting pressure on companies to improve efficiency and deliver returns on their investments, reported Reuters.
Microsoft’s shares have fallen nearly 23% in the first six months of 2026, marking their weakest first-half performance since 2022, according to Reuters report.
Why is Microsoft cutting jobs?
Microsoft said the layoffs are part of a wider business re-organisation rather than a shift towards AI replacing employees. The company said it wants to simplify operations and position different divisions for future growth.
Earlier this year, Microsoft offered voluntary buyouts to about 7% of its US workforce, or roughly 9,000 employees. The company also said more than 30% of employees eligible for its recent voluntary retirement programme chose to participate.
In its gaming business, Microsoft announced changes to its management structure. Four gaming studios will now operate under new leadership as the company seeks to protect their intellectual property and continue work on existing projects. “We are restructuring to position the business for long-term success,” it said, according to Reuters report.
Microsoft also said it has tried to retain employees where possible by moving workers into different roles. According to the company, more than 4,000 employees have been redeployed over the past year, including another 500 during the current month.
Microsoft’s Azure cloud business has continued to benefit from strong demand for AI services. However, the company has also committed to spending about $190 billion in 2026 on infrastructure, including new data centres needed to support AI products. Those investments have increased pressure on cash flows.
The company has also faced higher costs in its gaming business. Rising memory chip prices have pushed up Xbox console prices at a time when demand has remained soft.
What changes are coming to Xbox?
Microsoft’s Xbox gaming division has emerged as the biggest casualty of the company’s latest restructuring. The company said it will cut about 20% of Xbox’s workforce, laying off around 1,600 employees immediately and eliminating another 1,250 roles over the next year, reported New York Times.
The company is also reshaping its game studio business instead of simply shutting down several well-known developers. Double Fine and Compulsion Games will become independent companies under their current management and will keep the franchises they created under Microsoft. Undead Labs and Ninja Theory will be sold to new owners, while Arkane Studios is exploring other options.
Job cuts will also affect Activision Blizzard, ZeniMax Media and Xbox’s platform teams. Xbox chief executive Asha Sharma said the gaming business had become too large even as its audience declined. “Our platform teams are 40 percent larger than they were at the start of this generation, even as our player base and playtime have declined. As we reset Xbox, we will simplify,” she said, as reported by New York Times.
Sharma said Microsoft had invested heavily in its gaming business over the past few years, but the financial returns had failed to match expectations. “History is full of companies that mistake longevity for inevitability. We will not be one of them,” she said. She also revealed that Xbox lost 64 cents for every dollar invested in its game studios during a typical year, underlining the need for major changes, reported New York Times.
Microsoft spent billions expanding Xbox, including its $69 billion acquisition of Activision Blizzard in 2023 and its $7.5 billion purchase of ZeniMax Media, reported New York Times. The company hoped a larger catalogue of games would boost console and software sales. However, the Xbox Series X|S, launched in 2020, failed to meet commercial expectations.
Microsoft chief executive Satya Nadella also acknowledged the challenges facing the gaming business. “We have to turn this into a sustainable business that delivers what is fundamentally one of the best sources of entertainment,” he said. He added that many Xbox gamers who streamed gameplay on YouTube earned more money from the games than Microsoft itself.