Microsoft will cut thousands of jobs next week across sales, consulting, and Xbox, targeting less than 2.5% of its roughly 220,000-person workforce, according to people familiar with the plans.
Notifications go out during the week of July 6, just days after the company's new fiscal year began. The cuts are smaller than last year's two-round bloodletting, 6,000 in May 2025 and another 9,000 in July 2025, partly because Microsoft ran its first-ever voluntary retirement program earlier this year. About one-third of the roughly 8,750 eligible U.S. employees took buyouts, allowing the company to trim fewer heads through involuntary layoffs.
Sales employees with commission-based compensation were excluded from that buyout offer, according to an internal document viewed by Business Insider. Some affected workers will be offered new roles immediately.
The Xbox cuts had been telegraphed for weeks. Xbox CEO Asha Sharma warned employees the business "cannot continue" on its current trajectory, calling for a broad reset that included potential marketing and budget cuts.
Microsoft's most recent filing showed gaming revenue fell 7% to $5.3 billion for the period ending March 31, with hardware sales dropping 33% and content and services revenue declining 5%.
Microsoft is on pace to spend more than $100 billion building AI and cloud infrastructure in the fiscal year that just ended, up from $88.7 billion the year before, with roughly two-thirds going to AI chips. The layoffs are a portfolio rebalancing, moving resources out of labor-intensive functions and into capital-intensive AI bets, not a distress signal.
Wall Street isn't buying it yet. Microsoft shares closed at $373.02 Tuesday, down 19% over the past month and near a 52-week low.
Business Insider called it the stock's worst single-month performance since the dot-com bust. The broader tech industry has shed 123,653 jobs so far in 2026, up 66% from the same period in 2025, according to outplacement firm Challenger, Gray & Christmas. AI was the most commonly cited reason for cuts in May, the third straight month it topped the list.
