Microsoft is reportedly planning yet another round of layoffs that will slash thousands of roles next week in an effort to cut costs, as concerns about out-of-control AI spending mount.
Less than 2.5% of the company’s 220,000-person workforce – or fewer than 5,500 workers – will be axed from the sales and consulting divisions, as well as Xbox’s gaming unit, according to Business Insider.
The Redmond, Wash.-based software giant plans to announce the layoff round next week, just after the start of its new fiscal year on Wednesday, though the timing could change, sources told the outlet. Some impacted employees will be offered new roles within the company immediately.
Microsoft declined to comment.
It would mark its third major round of layoffs in just over a year, after slashing 6,000 jobs last May and another 9,000 – or 4% of its workforce – last July.
Amid the rapid rise of AI, the company has been facing both concerns that it’s spending too much on the new tech – with commitments of $190 billion on new infrastructure over the coming years – and fears that bots could render traditional software tools obsolete.
Shares in Microsoft tanked 19% in June for the stock’s worst month since the dot-com crash of the early 2000s.
News of additional layoffs comes as little surprise after Microsoft earlier this year launched a voluntary retirement buyout round for US employees whose years of employment and age are 70 or higher when added together.
About a third of the company’s 9,000 eligible workers took the offer, allowing Microsoft to cut fewer roles in this year’s expected layoff round, a source told Business Insider.
Layoffs have also been anticipated in Microsoft’s gaming unit, after new Xbox CEO Asha Sharma called for a “resetting” of the company,” saying it was “not in a healthy spot” amid declining revenue.
Xbox has spent the past two years closing studios, canceling new game releases and raising prices on its consoles as skyrocketing data center demand for chips sends component prices higher.
Last week, Apple blamed chip shortages as it hiked prices for its computers, tablets and home devices by as much as $500.
Xbox quickly followed suit with its third price hike on hardware since late 2025, raising prices by $150 across its suite of gaming consoles.
So far this year, nearly a third of all job cuts have hit the tech sector – and AI came in as the leading reason for announced layoffs in June for the fourth month in a row, according to a Challenger, Gray & Christmas report released Wednesday.
“The pace of layoffs cooled considerably in June, similar to plans last June, and as is typical for summer months,” Andy Challenger, the firm’s workplace expert and chief revenue officer, said in a statement.
“That said, the cuts we are seeing remain concentrated in technology, and artificial intelligence continues to reshape how companies think about headcount.”
Since 2023, when AI first emerged as a driving force in layoffs, the new tech has been cited in 173,568 job cut announcements, according to Challenger.