Microsoft has announced another round of layoffs that will impact around 4,800 employees globally, accounting for nearly 2% of its overall workforce. The cuts are part of a wider restructuring effort, with the company’s Xbox gaming division expected to bear the brunt of the changes.
The restructuring will be implemented over the course of the next financial year.
Xbox division faces biggest overhaul
The latest job cuts are centred on Microsoft’s Xbox gaming business, in what the company has described as the largest restructuring in the division’s history.
Earlier this year, Microsoft had already offered voluntary separation packages to nearly 9,000 employees in the United States, representing around 7% of its US workforce. The company routinely reassesses its staffing levels at the end of its fiscal year in June as it finalises priorities and spending plans for the upcoming year.
AI investments driving financial pressure
While Microsoft’s Azure cloud platform continues to benefit from surging demand for artificial intelligence services, the enormous investments required to build AI-focused data centres have placed increasing pressure on the company’s finances. Until April, Azure served as the exclusive cloud provider for OpenAI’s models.
The company, which is set to report its quarterly earnings later this month, previously forecast Azure revenue for the quarter to surpass Wall Street expectations. At the same time, Microsoft announced plans to spend $190 billion in capital expenditure during 2026, significantly above analysts’ estimates.
Beyond its cloud business, Microsoft is also navigating rapid changes in its software operations as AI tools automate an increasing number of routine workplace tasks. Rising memory chip prices, fuelled by growing demand from AI data centres, have further pushed up manufacturing costs for Xbox consoles. The company has already increased Xbox console prices despite relatively weak consumer demand.
Last month, Xbox chief Asha Sharma acknowledged that the gaming division required a “reset,” revealing that its operating margin had dropped to just 3%, making restructuring unavoidable while leaving room for future mergers and acquisitions.
“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,” Sharma wrote in a memo to employees published on Microsoft’s website. “Going forward, this cannot continue.”
