Microsoft has announced another round of layoffs that will affect around 4,800 employees worldwide. The cuts represent nearly 2% of the company's global workforce. The gaming division will face the biggest impact as Microsoft continues a wider restructuring exercise across its business.
Microsoft Layoffs Follow Earlier Voluntary Exit Programme
Earlier this year, Microsoft offered voluntary separation packages to nearly 9,000 employees in the United States. That number accounted for about 7% of its US workforce. The company regularly reviews its staffing levels at the end of its fiscal year in June. During this period, it finalises budgets and spending plans for the next financial year.
Microsoft's AI Expansion Increases Costs Despite Azure Growth
Microsoft continues to benefit from strong demand for artificial intelligence services. Its Azure cloud platform has recorded solid growth as businesses increasingly adopt AI technologies. Until April, Azure served as the exclusive cloud provider for OpenAI's models.
However, Microsoft's rapid AI expansion has also increased its costs. The company has invested heavily in building new data centres to support AI services. These investments have put additional pressure on its cash flow.
Microsoft Plans $190 Billion Capital Spending in 2026
Microsoft will announce its quarterly earnings later this month. The company has already projected that Azure's quarterly revenue will beat Wall Street expectations. At the same time, Microsoft revealed plans to spend $190 billion on capital expenditure in 2026. The investment is much higher than analysts had expected and highlights the company's continued focus on expanding its AI infrastructure.
Why Microsoft's Xbox Gaming Business Is Under Pressure
Microsoft is also facing challenges in its software and gaming businesses. AI-powered tools are increasingly automating routine workplace tasks. At the same time, rising memory chip prices have increased the cost of producing Xbox consoles. Despite weak demand for gaming hardware, Microsoft recently raised Xbox console prices to offset higher production costs.
Xbox Chief Says Business Needs a 'Reset'
Last month, Xbox gaming division chief Asha Sharma said the business needed a major turnaround. She revealed that the gaming division's profit margin had dropped to just 3%. She said restructuring had become necessary and suggested the company could also consider mergers and acquisitions in the future.
"Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time," she said in a memo to employees published on Microsoft's website.
The latest layoffs reflect Microsoft's effort to reduce costs while continuing to invest heavily in artificial intelligence. The company is balancing workforce restructuring with record spending on AI infrastructure as it prepares for its next phase of growth.