REDMOND, Wash. (BN24) — Microsoft is laying off thousands of workers in its biggest round of job cuts in more than two years, targeting roles across the company’s Xbox video game business, sales operations and other divisions as it pivots more resources into artificial intelligence.
Layoff notices began going out Wednesday, hitting about 4% of Microsoft’s workforce as measured a year ago. While the company did not confirm the total number of layoffs, that figure suggests nearly 9,100 positions could be eliminated. Among those affected are 830 workers tied to Microsoft’s Redmond, Washington, headquarters, according to state notices released Wednesday.
The company said the sweeping cuts reflect “organizational changes” needed to compete in what it described as a “dynamic marketplace.” Employees in multiple regions and teams will be impacted, part of a broader strategy to trim layers of management and reallocate investment into growth areas like AI and cloud computing.
In a memo to staff, Xbox CEO Phil Spencer said the layoffs would help position Microsoft’s gaming division “for enduring success and allow us to focus on strategic growth areas.” He indicated Xbox would follow the broader company initiative “in removing layers of management to increase agility and effectiveness.”
The cuts follow a series of smaller workforce reductions earlier this year as Microsoft contends with slowing growth in some legacy segments and surging costs linked to AI infrastructure. In May, the company laid off roughly 6,000 employees — nearly 3% of its global headcount — marking what was then its largest job reduction since the pandemic. That same month, Microsoft cut nearly 2,000 workers in the Puget Sound region, most of them in software engineering and product management roles.
Just weeks ago, another 300 Redmond-based employees were let go, adding to unease among some workers about whether AI-powered tools will shrink demand for human coders. Chief Executive Satya Nadella has publicly estimated that software now writes “maybe 20, 30% of the code” for some internal Microsoft projects.
While the layoffs have spread across divisions, Wedbush Securities analyst Dan Ives said the latest moves appeared centered on slower-growing parts of the business, including Xbox. “They’re focused more and more on AI, cloud and next-generation Microsoft and really looking to cut costs around Xbox and some of the more legacy areas,” Ives said. “This is Nadella and team making sure that they’re keeping with efficiency and that’s the name of the game in Wall Street.”
The downsizing comes less than a year after Microsoft finalized its $75.4 billion acquisition of Activision Blizzard, the maker of blockbuster franchises such as Call of Duty and Candy Crush. That followed a $7.5 billion acquisition of ZeniMax Media, the parent company of Bethesda Softworks, as part of a years-long expansion to strengthen Xbox’s standing against competitors like Sony’s PlayStation.
But more recently, Microsoft has funneled billions into building data centers, specialized chips and other infrastructure to accelerate its AI ambitions. The company estimated those expenses would total around $80 billion in the last fiscal year, which ended Sunday.
The layoffs underscore how even the world’s most valuable tech companies are reshaping workforces to align with rapidly changing priorities. Microsoft had 228,000 full-time employees globally as of last June, but a combination of layoffs and slower hiring has already reshaped that figure heading into the new fiscal year.
AP
