Microsoft Reportedly Prepares Thousands of Job Cuts Amid AI Spending Concerns
The tech giant is slated for its third major layoff round in over a year, impacting sales, consulting, and gaming divisions.
Microsoft is reportedly preparing to lay off thousands of employees next week as the company seeks to cut costs amid growing concerns about its substantial investments in artificial intelligence. The planned layoffs, which could affect fewer than 5,500 workers—less than 2.5% of its 220,000-person global workforce—are expected to target roles within the sales and consulting divisions, as well as the Xbox gaming unit.
The timing of the announcement is anticipated shortly after the start of Microsoft's new fiscal year on Wednesday, although sources indicate this could change. Some employees facing layoffs may be offered new positions within the company.
This move would represent Microsoft's third significant round of job cuts in just over a year, following layoffs of 6,000 employees in May and an additional 9,000 in July of the previous year.
The company's extensive spending on AI infrastructure, with commitments of $190 billion over the coming years, has reportedly raised internal concerns about escalating costs. Additionally, there are broader industry anxieties that advancements in AI could render traditional software tools obsolete.
Microsoft's stock experienced a notable decline, falling 19% in June, marking its worst monthly performance since the dot-com crash in the early 2000s.
Earlier this year, Microsoft initiated a voluntary retirement buyout program for U.S. employees who met a combined age and tenure threshold of 70 years. Approximately one-third of the 9,000 eligible workers accepted this offer, potentially reducing the number of roles impacted by the upcoming layoffs.
In the gaming sector, layoffs have been anticipated following remarks by new Xbox CEO Asha Sharma, who described the unit as "not in a healthy spot" and called for a "resetting" amid declining revenues. Xbox has recently implemented price increases for its hardware, a move attributed to rising component costs amidst global chip shortages, which have also affected other tech companies like Apple.
The technology sector has seen a significant number of job cuts this year, with AI emerging as a primary driver for layoffs announced in June, according to a report by Challenger, Gray & Christmas. The firm noted that while the overall pace of layoffs cooled in June, the concentration remains within the technology industry, with artificial intelligence continuing to influence workforce strategies.
Since 2023, AI has been cited as a reason for over 173,000 job cut announcements, according to Challenger's data.