Microsoft to cut up to 2.5% of workforce in new layoff round

Microsoft will announce a new round of job cuts that will affect fewer than 2.5% of its 220,000‑person workforce, targeting sales, consulting and Xbox roles [1]. The move comes as the company tries to rein in costs while accelerating AI investment, after its stock slipped about 19% in the past month—the steepest decline since the dot‑com era.

Cost control amid AI spending

Microsoft’s leadership is balancing a surge in AI‑related outlays with the need to keep operating expenses in check. The upcoming cuts are smaller than the 4% workforce reduction it executed in 2025, when 15,000 jobs were eliminated across two waves [1]. By keeping the new round under 2.5%, the company can lower headcount without the larger shock of a double‑digit reduction. The layoffs will primarily hit sales and consulting teams, as well as the Xbox gaming division, where a “reset” has already been signaled by the new gaming CEO [1].

Impact on employees and broader strategy

Some affected staff will be offered new roles immediately, a tactic that may smooth the transition and preserve critical talent [1]. Earlier in the year, Microsoft rolled out a voluntary retirement program for U.S. employees aged 70 or older, with about one‑third of eligible workers taking the buyout—helping to keep the overall cut percentage lower than last year’s [1]. The company’s stock decline, the worst monthly slide since the late‑1990s, underscores investor concern that AI could cannibalize existing software services [1].

What to watch

• The exact announcement date and the final headcount figure, expected next week.
• How the layoffs intersect with Microsoft’s AI budget growth and any subsequent hiring freezes.
• Reactions from the Xbox division’s new leadership and whether further restructuring follows.

The significance of this latest reduction lies in Microsoft’s attempt to fund its AI ambitions without eroding the workforce that powers its core businesses—a balancing act that will shape its competitive position in the fast‑moving cloud and gaming markets.