Microsoft is about to lay off 4,800 jobs, or roughly 2.1 percent of its global workforce, as the tech giant is restructuring its business as AI takes hold.
This move is Microsoft’s latest cost-cutting effort as it strives to reposition itself to respond to changing technology and changing markets. It will mean 3,200 jobs will be laid off from the Xbox gaming division that is now nearly 20% of its workforce.
Xbox is on the brink of deep workforce reduction
According to an internal email from Xbox CEO Asha Sharma, about 1,600 Xbox employees are among the 4,800 workers leaving immediately, and 1,600 positions will be phased out over the course of Microsoft’s fiscal year 2027.
Sharma said that extending the restructuring over a year would cause uncertainty for employees but the company believes it is the best way to complete the transition.
"Unfortunately, it is not possible to make all the necessary changes in a single day," Sharma wrote in the memo and said she hopes that Xbox would “return to growth in 2027.”
Microsoft Says AI Is Reshaping the Industry
As a result of advancements in artificial intelligence, the technology landscape is evolving faster than ever before, Amy Coleman, the chief people officer, said.
"The way technology is built, deployed, and used is transforming faster than at any point in my time here," Coleman wrote, and the company has to adjust its workforce as well as business priorities.
Microsoft has spent billions of dollars to build AI infrastructure and services in the past two years but still has to change its operations as competition is heating up across the sector.
Investor Pressure and Slowing Business Segments
The layoffs come during a tough year for Microsoft in the stock market. The company’s shares have fallen 19 percent in 2026, making it the worst performing among the largest tech companies as investors worry that generative AI will disrupt traditional enterprise software and Microsoft’s own AI products have not delivered great commercial success.
On Monday, Microsoft shares slipped another 1 percent, even as the Nasdaq Composite gained about 1 percent.
Although Microsoft’s cloud computing business and LinkedIn have continued to grow nicely, the other business segments have struggled recently. Revenue from the Windows operating system licensing business, Surface devices, and the Xbox gaming division has been challenged.
Latest in a series of Layoffs
This is not Microsoft’s first major workforce reduction. The company has also laid off a number of workers last year, including one that affected approximately 9,000 employees.
The latest cuts reflect the larger trend of technology companies to cut back on costs for investment in AI in order to grow the business more organically.
Microsoft is aggressively pursuing AI as it accelerates its AI strategy and it seems to be looking for a way to balance long-term innovation with operational efficiency, even if that means reducing staff in the near term.
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