Microsoft is cutting about 2.1% of its workforce, or roughly 4,800 jobs, the latest in a wave of tech layoffs as the Windows maker spends heavily on AI infrastructure and uses the technology to improve efficiency across its business.
Big Tech's historic AI outlays, set to top $700 billion this year, are piling pressure on companies to show returns from the technology and offset the rising cost of rolling it out across their businesses. Amazon and Meta Platforms have also laid off thousands of employees this year.
Microsoft announced the cuts on Monday following a rough stretch, with its shares falling nearly 23% in the first six months of 2026, their worst first-half performance since 2022.
The software giant earlier this year offered voluntary buyouts to about 7% of its U.S. workforce, or about 9,000 employees. Microsoft often trims jobs near the end of its fiscal year in June as it sets spending plans for the new year.
Booming AI demand has powered growth at Microsoft's Azure cloud-computing business, which was the exclusive seller of OpenAI's models until April, but the mounting cost of building data centers to run those services is squeezing its cash flows.
The company, expected to report results later this month, had in April forecast quarterly Azure sales above Wall Street estimates, but also issued a $190 billion spending projection for 2026 that massively surpassed expectations.
AI tools that can increasingly automate routine business tasks have also emerged as a threat to its lucrative software business, while a surge in memory chip prices driven by data center demand has forced Microsoft to raise Xbox console prices at a time when demand for the console was already soft.
The gaming division's new head, Asha Sharma, said last month the business needed a "reset" and that its profit margin had declined to 3%, forcing a restructuring that could include potential M&A.
"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 said in an outspoken memo to employees published on Microsoft's website. "Going forward, this cannot continue."
The company is considering options for the Xbox gaming unit, including a potential spinoff or restructuring as a wholly owned subsidiary, the Information reported last month.
