Microsoft is cutting thousands of jobs in what marks its second large-scale layoff in recent months and its most significant workforce reduction since 2022. The latest round of job cuts, announced on Wednesday, is impacting several divisions, including the Xbox gaming unit and global sales teams.
While the company has not disclosed the exact number of employees affected, it confirmed the layoffs will involve fewer than 4% of its total workforce as of last year. With Microsoft employing around 228,000 full-time staff as of June 2023, this suggests nearly 9,000 jobs may be eliminated.
The company stated that these workforce changes are part of ongoing efforts to adapt to a rapidly evolving market. “We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace,” Microsoft said.
Xbox head Phil Spencer also addressed the cuts in a memo to staff, explaining that the decision aims to align the gaming division with long-term growth priorities. He emphasized the importance of streamlining operations by removing layers of management to boost agility and efficiency.
This latest round of layoffs follows a series of job cuts earlier in the year. In May, Microsoft laid off approximately 6,000 employees, about 3% of its workforce at the time — its biggest reduction in over two years. That was followed by an additional 300 cuts in June, primarily at the company’s Redmond, Washington headquarters. In total, nearly 2,000 jobs were lost in the Puget Sound area alone during May.
Earlier layoffs disproportionately affected roles in software engineering and product management, particularly in Washington and California, sparking concerns that the company’s growing use of AI tools — such as automated code generators — could be displacing technical roles. Microsoft CEO Satya Nadella has previously noted that AI is now responsible for writing 20–30% of code in some projects.
Despite ongoing cuts, Microsoft has continued to invest heavily in artificial intelligence, cloud computing, and other high-growth areas. According to Wedbush Securities analyst Dan Ives, the latest layoffs appear to be targeting parts of the business that are not growing as quickly, such as Xbox. “They’re focused more and more on AI, cloud, and next-generation Microsoft,” said Ives. “This is Nadella and his team making sure they’re staying efficient — that’s what Wall Street wants.”
The reduction in Xbox staff comes after years of aggressive investment in the gaming sector. In 2023, Microsoft completed its $75.4 billion acquisition of Activision Blizzard, the company behind gaming giants like Call of Duty and Candy Crush. Prior to that, Microsoft had also acquired ZeniMax Media, the parent company of Bethesda Softworks, for $7.5 billion in an effort to compete more directly with Sony’s PlayStation.
Microsoft’s leadership has maintained that trimming managerial layers and rebalancing talent is essential to staying competitive, especially as it continues to shift focus toward AI-powered tools and platforms.
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