Microsoft may cut under 2.5% of workforce as AI spending reshapes priorities

Microsoft is reportedly preparing another round of workforce reductions that could affect thousands of employees across several business units, including sales, consulting and its Xbox gaming division, as the technology giant continues to realign its operations around artificial intelligence.According to a report by Business Insider, citing people familiar with the matter, the layoffs could be announced as early as next week. While the exact timing remains uncertain, the report said the planned cuts are expected to impact fewer than 2.5% of Microsoft's global workforce, making them smaller than the company's major layoffs last year.The restructuring is expected to coincide with Microsoft's ongoing efforts to manage costs while significantly increasing investments in AI infrastructure. The company has been allocating billions of dollars toward expanding its AI capabilities, even as investors closely watch how the rapid adoption of artificial intelligence could reshape its traditional software businesses.Some employees whose positions are eliminated may be offered alternative roles within the company immediately, according to one of the people cited in the report.Microsoft employed approximately 228,000 people worldwide as of June 30, 2025, according to its latest regulatory filings. A reduction of under 2.5% would still translate into several thousand jobs.Also read: Meta restricts employees' use of Claude Code and Codex over model distillation: ReportThe Xbox gaming division is expected to be among the areas most affected. Earlier this month, Bloomberg reported that Microsoft's gaming business was preparing for significant job cuts alongside reductions in marketing and other operational budgets.Separately, The Information reported that Microsoft has been exploring strategic options for Xbox, including the possibility of restructuring the business or operating it as a wholly owned subsidiary.Before the latest reported layoffs, Microsoft had introduced a voluntary retirement programme for eligible US-based employees below senior leadership positions. Business Insider reported that around one-third of eligible employees accepted the offer, helping reduce the scale of the planned job cuts. Employees in commission-based sales roles were reportedly excluded from the programme.Microsoft has historically announced organisational changes and workforce reductions around the beginning of its fiscal year, which starts on July 1.The company carried out multiple rounds of layoffs in 2025, eliminating around 6,000 jobs in May before announcing another 9,000 cuts in July, together accounting for roughly 4% of its workforce.Microsoft has not publicly confirmed the latest reported restructuring plans.