Microsoft has confirmed that it will lay off about 9,000 employees, about 4% of its global workforce. This is the company’s biggest round of job cuts since 2023. The announcement came as Microsoft began its new fiscal year for 2026, showing a clear shift in focus towards artificial intelligence and cost-saving.
Microsoft had around 228,000 employees worldwide as of June 2024. The company said the layoffs will impact different teams, locations, and experience levels. However, it did not share which departments would be most affected.
According to reports, many of the layoffs will hit the sales and marketing teams, as well as the gaming division, including Xbox, Activision Blizzard, King, and ZeniMax.
According to a memo presented by the verge, Xbox chief Phil Spencer told employees, “To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.”
The news comes after Microsoft already laid off more than 6,000 employees in May and June. This brings the total number of layoffs in 2025 to over 15,000. In January, Microsoft also cut about 1,900 jobs from its gaming and Activision Blizzard teams.
Another 1,000 jobs were lost in June from teams working on HoloLens and the Azure cloud platform. Back in September 2024, Microsoft also let go of 650 Xbox employees as part of its restructuring plan related to the Activision Blizzard acquisition.
The layoffs are part of a larger plan to reduce management layers and reorganize teams to operate more efficiently. Microsoft said the goal is to respond better to a fast-changing tech industry and economic pressures.
A spokesperson from Microsoft said in an email, “We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace.”
One reason behind the layoffs is Microsoft’s large investment in artificial intelligence. The company plans to spend more than $80 billion on AI infrastructure during its 2025 fiscal year. This is a $25 billion increase from the previous year. Microsoft says it is not replacing employees with AI. But it needs to reduce costs in other areas. This will help afford these long-term investments.
Phil Spencer said in his message to the gaming team that these changes are necessary for long-term success. “We will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management,” he wrote. “This is to increase agility and effectiveness.”
Employee morale inside Microsoft has been low due to the ongoing layoffs. Many workers say the constant rounds of job cuts have created uncertainty and fear. This is especially true for those based on performance earlier in the year. Data showed that only 17% of those laid off in May were managers. The company claims it wants to reduce the number of management levels.
Some employees, speaking anonymously, said it’s been tough to stay motivated. “It’s hard to focus when you don’t know if your team will be here next week,” said one engineer.
While Microsoft says these cuts are about creating a more agile and focused organization, thousands of workers now find themselves without jobs.
