Microsoft will eliminate 4,800 positions as AI grow
As the Windows developer makes large investments in AI infrastructure and uses the technology to increase efficiency across its business segments. Microsoft plans to lay off roughly 4,800 employees, or 2.1% of its workforce, amid a wave of layoffs throughout the IT industry.
Major tech companies are expected to spend over $700 billion on AI this year. Which is putting tremendous pressure on businesses to show the technology’s return on investment and offset the growing expenses of incorporating it into their operations. This year, thousands of workers have also been let go by Amazon and Meta Platforms.
Following a challenging period in which its stock dropped by almost 23% in the first half of 2026. Its worst first-half performance since 2022—Microsoft announced the changes on Monday.
The software behemoth provided voluntary severance payouts to roughly 9,000 workers, or 7% of its U.S. workforce, earlier this year. When Microsoft establishes its expenditure plans for the upcoming year, it usually makes layoffs around June, near the end of its fiscal year.
Microsoft’s Azure cloud computing company, which was the sole supplier of OpenAI’s models until April. Has grown as a result of the growing demand for artificial intelligence. But its cash flows are being strained by the rising cost of constructing data centers to support those services.
The software business
AI tools, capable of increasingly automating routine business tasks, have also become a threat to its lucrative software business. While rising memory chip prices—driven by data center demand—have forced Microsoft to raise Xbox console prices at a time when demand for the console was already weak.
The new head of the gaming division, Asha Sharma, said last month that the business needed a «reset» and that its profit margin had shrunk to 3%. Necessitating a restructuring that could include potential mergers and acquisitions.
«Excluding Activision Blizzard King, over the last five years we have spent more than $20 billion on ongoing investments in our content, our platform, and hardware subsidies. Yet our annual revenue has declined by nearly $500 million during that time,» she stated in a candid memo to employees posted on Microsoft’s website. «Going forward, this cannot continue.»
The company is weighing options for the Xbox gaming unit, including a possible spinoff or restructuring as a wholly owned subsidiary, The Information reported last month.
