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The company joins Amazon and Meta in trimming its workforce as Big Tech pours billions into artificial intelligence.
Microsoft said says the layoffs are not driven by AI replacing workers but by a broader restructuring of its commercial and gaming businesses. (IMAGE: REUTERS)
Microsoft on Monday said it is cutting about 4,800 jobs, or roughly two per cent of its global workforce, as the Windows maker restructures parts of its commercial and Xbox businesses while ramping up investments in artificial intelligence (AI).
The layoffs mark the deepest overhaul in Xbox’s history, with around 3,200 gaming jobs set to be eliminated over the coming fiscal year. As part of the restructuring, Microsoft will also spin off or sell four game studios, while a fifth has entered a review process that could ultimately lead to its closure.
The announcement comes as Big Tech pours record sums into AI infrastructure. Industry-wide AI spending is expected to exceed $700 billion this year, piling pressure on companies to generate returns from the technology while offsetting the soaring cost of building AI-ready data centres and computing infrastructure. Amazon and Meta have also laid off thousands of employees this year.
“Our business is changing because the world around it is changing,” Amy Coleman, Microsoft’s Chief People Officer, wrote in a memo to employees.
“Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.”
Coleman said the layoffs were concentrated in Microsoft’s commercial business and Xbox.
She stressed that the eliminated positions were “not being replaced by AI”, but acknowledged that artificial intelligence was fundamentally changing how work gets done across the company.
“I also want to be direct that the roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done,” she wrote.
Coleman said the restructuring builds on Microsoft’s recently announced $2.5 billion initiative to deploy 6,000 engineers within enterprise clients to accelerate AI adoption.
Analysts said Microsoft has been reducing its workforce even as it ramps up AI spending.
“Microsoft has been managing down its workforce in order to pay for its AI investments. By keeping its headcount down, they have been able to accelerate revenue growth while maintaining the same margins,” said Gil Luria, managing director at D.A. Davidson told news agency Reuters.
Booming demand for AI has fuelled rapid growth in Microsoft’s Azure cloud business, but the mounting cost of building data centres to support those services has also squeezed cash flows. Earlier this year, the company projected capital expenditure of about $190 billion for 2026 as it expands its AI infrastructure.
In a separate memo, accessed by news agency AFPXbox CEO Asha Sharma said 1,600 positions would be eliminated immediately, with the remaining cuts taking place through fiscal year 2027.
Xbox has undergone successive rounds of layoffs since Microsoft’s $68.7 billion acquisition of Activision Blizzard was completed in 2024 following a prolonged regulatory review over competition concerns.
Sharma described Xbox’s business as “not healthy”, saying its profit margins were “three to 10 times lower” than those of its rivals.
She succeeded longtime Xbox chief Phil Spencer, who retired in February, and has pledged to return the gaming division to growth by 2027.
“History is full of companies that mistake longevity for inevitability,” Sharma wrote. “We will not be one of them.”
Under the restructuring plan, Compulsion Games and Double Fine Productions will become independent studios while retaining their intellectual property and game catalogues.
Ninja Theory and Undead Labs are in talks to join new owners, with funding in place to continue their ongoing projects.
In France, Arkane’s management has begun a mandatory consultation with its Works Council to examine what Sharma described as “potential strategic options”, a process that could eventually result in the studio’s sale or closure.
About the Author
Shankhyaneel Sarkar is a senior subeditor at News18. He covers international affairs, where he focuses on breaking news to in-depth analyses. He has over five years of experience during which he has c…Read More
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