Microsoft is planning another round of layoffs that will cut thousands of positions next week, marking the company’s third major workforce reduction in just over a year as concerns about out-of-control AI spending continue to mount.
Less than 2.5% of the company’s 220,000-person workforce, or fewer than 5,500 workers, will be affected across sales, consulting, and Xbox gaming divisions, according to Business Insider. The Redmond, Washington-based software giant plans to announce the cuts next week, just after the start of its new fiscal year on July 1, though timing could change.
The news, first reported by the New York Post, comes after Microsoft slashed 6,000 jobs last May and another 9,000 in July 2025. Some impacted employees will be offered new roles within the company immediately, sources said.
The layoffs reflect a broader tension in the technology sector: companies are committing enormous sums to AI infrastructure while simultaneously cutting headcount to manage costs. Microsoft has committed $190 billion to new infrastructure over the coming years, even as shares tumbled 19% in June for the stock’s worst month since the dot-com crash of the early 2000s.
The company’s gaming unit has been particularly vulnerable. New Xbox CEO Asha Sharma recently called for a “resetting” of the division, saying it was “not in a healthy spot” amid declining revenue. Xbox has spent the past two years closing studios, canceling game releases, and raising console prices as skyrocketing data center demand sends component costs higher.
The layoffs extend a troubling trend in the tech sector. According to a Challenger, Gray & Christmas report released July 1, nearly a third of all job cuts this year have hit the tech sector, and AI has been the leading reason cited for layoffs in June for the fourth consecutive month. Since 2023, AI has been cited in 173,568 job cut announcements.
“The pace of layoffs cooled considerably in June, similar to plans last June, and as is typical for summer months,” said Andy Challenger, the firm’s workplace expert. “That said, the cuts we are seeing remain concentrated in technology, and artificial intelligence continues to reshape how companies think about headcount.”
For New York’s tech workforce, which has grown significantly as companies expand operations in the city, the cuts could have localized impact. Microsoft maintains offices in Manhattan and has been a participant in the city’s tech ecosystem, making the layoffs relevant to the local labor market despite the company’s West Coast headquarters.
