Microsoft is set to join the long list of Big Tech companies announcing layoffs while investing heavily in artificial intelligence and trying to control costs. The Satya Nadella-led firm plans to cut under 2.5% of its workforce, according to a Business Insider report citing sources. Microsoft, for its part, has yet to publicly respond to the report.
The layoffs report surfaced about a month after Asha Sharma, the new CEO of Microsoft’s Xbox gaming division, sent a memo to employees signalling a “reset” for the business.
Who will be impacted by new wave of Microsoft layoffs?
Although this particular round of layoffs, set to be announced next week, will be considerably smaller than previous job cuts, it is still expected to impact thousands of employees, according to Business Insider.
People familiar with the situation told the outlet that workers in the sales and consulting departments will be on the much-feared checklist. Others at the Xbox gaming division also fear losing their jobs.
A source privy to the information further told BI that some employees affected this time may be relocated to new roles immediately.
According to a US Securities and Exchange Commission filing, Microsoft had roughly 228,000 full-time employees as of June 30, 2025. Last year, the tech giant eliminated 6,000 roles in May, followed by another layoff round in July that impacted 9,000 employees, or about 4% of the workforce.
The company’s decision to cut around 15,000 jobs last year was backed by CEO Satya Nadella’s assertions in a memo to employees at the time, highlighting the need to “reimagine” the “mission for a new era” while accepting the AI-driven changes to the tech landscape.
Earlier this year, the company founded by Bill Gates announced a voluntary retirement program providing buyouts to employees at level 67 and below in the United States who had 70 or more years of age and service. Nearly 9,000 employees, or about 7% of Microsoft’s 125,000 US workforce, were eligible for the scheme, allowing the company to cut a percentage of its workforce.
Xbox layoffs imminent?
Indian-origin Asha Sharma, who took charge as Xbox CEO in February, has yet to formally draft any plans to cut jobs. Nevertheless, a recent Bloomberg report fuelled speculation about “significant” staff reductions beginning in early July.
As far as the information relayed by the business site goes, the gaming division’s new job cuts could affect marketing and other budgets. Gaming outlet Giant Bomb added to the conversation by reporting that as many as 1,000 employees could be affected by the devastating job market switch, as Microsoft nears its fiscal year end.
The major decision about people’s jobs ultimately comes down to widespread concerns about cost-cutting. In an email to employees, Sharma had previously said that the Xbox business had slumped to a 3% “accountability margin.”
“Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,” she wrote, adding, “Going forward, this cannot continue.”
Once officially announced, Microsoft’s AI-focused layoffs will join the ranks alongside numerous tech sector rivals, including Meta and Amazon. While Mark Zuckerberg’s social media giant has already cut 10% of its workforce, the Jeff Bezos-founded business also mapped out plans to eliminate roughly 16,000 jobs globally.
According to layoffs and startup tracker Layoffs.fyi, 122,524 tech employees have been laid off across 214 tech companies as of late June 2026.
Disclaimer: Figures mentioned in this article are based on publicly available reports. The Financial Express Digital has not verified them independently.