Microsoft is planning a new round of layoffs affecting up to 5,000 employees starting next week, according to Fox Business reporting based on a Business Insider report. The move aims to cut costs and shift resources toward artificial intelligence, specifically targeting sales, consulting, and the Xbox gaming division.
Why is Microsoft cutting 5,000 jobs?
Microsoft is reallocating its budget to prioritize artificial intelligence (AI), a sector currently seeing massive investment across the tech industry. According to Fox Business, the company intends to concentrate funds on strategic areas while reducing spending on teams that do not align with these AI objectives.
This restructuring follows a period of market volatility. Microsoft’s stock fell approximately 19% over the last month, marking one of its worst monthly performances since the dot-com bubble. Wall Street analysts have warned that AI could potentially replace certain software services, including some of Microsoft’s own offerings.
Which departments are most affected?
The cuts will primarily hit sales, consulting, and the Xbox gaming unit. The Verge reported on Tuesday that the gaming business plans to start layoffs next week, which could lead to studio closures, mergers, spin-offs, and the cancellation of specific game projects.
The gaming division is under particular pressure. Asha Sharma, the executive director of Xbox, recently sent a memo to staff calling for a “reset” of the business following months of inconsistent performance. To offset costs, Xbox recently raised console prices by $100 to $150 globally, attributing the hike to increased demand for memory and storage driven by the AI boom.
How does this compare to previous Microsoft layoffs?
This projected cut is part of a larger, staggered reduction of personnel over the last year. Business Insider sources indicate that Microsoft has already eliminated around 15,000 positions throughout 2025, including 6,000 in May and 9,000 in July.
| Period | Estimated Job Cuts | Context |
|---|---|---|
| Last Summer | ~9,000 (4% of staff) | Major restructuring phase |
| May 2025 | ~6,000 | Staggered reduction |
| July 2025 | ~9,000 | Staggered reduction |
| Upcoming (2026) | Up to 5,000 | AI resource reallocation |
What happens to the displaced employees?
Not all affected workers will leave the company. Business Insider reports that some employees will receive immediate offers to move into new roles within Microsoft as part of the reorganization.
The scale of the upcoming cuts is smaller than previous rounds because Microsoft implemented a voluntary retirement program earlier this year. According to sources, about one-third of eligible employees took the voluntary buyout, which already reduced the headcount before the mandatory cuts began.
FAQs about Microsoft’s Restructuring
Who is being laid off at Microsoft?
Workers in sales, consulting, and the Xbox gaming division are the primary targets of the upcoming cuts.
Why is the Xbox division cutting staff?
The division has faced irregular performance and is undergoing a “reset,” as described by Asha Sharma, while shifting resources toward AI.
How many people are expected to lose their jobs?
Up to 5,000 employees may be affected starting next week, following roughly 15,000 cuts already made in 2025.
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