Microsoft Readies Thousands of Layoffs Even as It Bets $190 Billion on AI

The reductions, reported to land next week, arrive with Microsoft's stock down 19 percent in a month and Wall Street questioning whether its record AI budget will pay off.

Microsoft is preparing to lay off thousands of employees as soon as next week, even as it commits a record $190 billion to building out artificial intelligence, according to a report from Business Insider that GeekWire independently confirmed. The cuts will fall on under 2.5 percent of the company's global workforce of roughly 220,000 people, which works out to somewhere between 5,000 and 5,700 jobs, and will reach across its sales and consulting teams as well as its Xbox gaming division.

The reductions are expected to be announced in the week beginning July 6, though the exact timing is not fixed. Some of those affected will be offered other roles inside the company. Microsoft declined to comment.

The pattern is now familiar.

A smaller round than last year, driven by the same math

This year's cuts are shallower than the ones Microsoft made in 2025, and part of the reason is that the company thinned its ranks another way first. In April, it offered buyouts to about 7 percent of its US staff, close to 9,000 people, and roughly a third accepted. Those exits let Microsoft reduce headcount without formally laying off as large a share as it did a year earlier. The buyout was a newer instrument for a company that had rarely leaned on voluntary separation at that scale before.

The company, which turned 51 this year, has been cutting on and off since the pandemic subsided. It announced 10,000 job losses in January 2023, then trimmed further over the following two years as money and attention shifted toward AI. Last year alone it cut about 6,000 roles in May and another 9,000 in July, the latter amounting to nearly 4 percent of its workforce and ranking among the largest reductions in its history.

Microsoft also tends to reshape its operations right around the June 30 close of its fiscal year, and this round arrives just as the new one begins. The rationale has stayed constant under chief executive Satya Nadella: hold down operating costs while AI consumes a growing share of the budget.

The Xbox reset

The gaming side of the business was bracing for this before the wider report landed.

On June 10, Xbox chief executive Asha Sharma, who took over from Phil Spencer in February, and Chief Content Officer Matt Booty published an internal memo calling for a sweeping reset of the division. Sharma told staff the business was "not in a healthy spot." The memo laid out the reasons in unusually blunt financial terms: a revenue decline of roughly $500 million a year over five years, a profit margin of about 3 percent, a studio system that had grown too large, and a component cost crisis that has driven storage prices to several times their level in late 2025. The reset commits Microsoft to funding its biggest franchises harder while pulling back on the sprawling portfolio of studios it had assembled.

Hanging over all of it is the $68.7 billion Microsoft paid to acquire Activision Blizzard, a deal it has spent the two years since absorbing while cutting staff and raising prices elsewhere in the unit.

The sharpest edge of the Xbox cuts may be its studios. The Verge and Bloomberg have reported that at least five are at risk of closure or sale: Arkane Lyon, the studio behind Dishonored, along with Compulsion Games, Double Fine, Ninja Theory, and Undead Labs. Microsoft is said to be exploring selling or spinning the studios off rather than shutting them outright, which could let some survive under new owners. More than 3,500 unionized Xbox workers have publicly criticized the company over the looming cuts. For a division marking 25 years, this could be the largest single workforce reduction in its history.

The $190 billion question

Every part of this sits against a backdrop of extraordinary spending. Microsoft expects to lay out about $190 billion in capital expenditure this calendar year, a 61 percent jump from last year, with the overwhelming majority aimed at AI and cloud infrastructure. When the company disclosed that plan, it landed some $35 billion above what analysts had penciled in, and Microsoft attributed roughly $25 billion of the figure to rising component prices rather than added capacity. In the fiscal year that just closed, it poured more than $100 billion into that buildout, up from $88.7 billion the year before, with about two-thirds going to the chips that run AI workloads.

The same component squeeze runs through both stories. The inflation in memory and storage parts that is inflating Microsoft's AI hardware bill is also one of the pressures cited in the Xbox reset, where the cost of components has climbed sharply since late 2025. The AI budget and the gaming cuts are linked rather than separate.

The spending is not happening in a vacuum of demand. Azure grew 40 percent last quarter, and the company's AI revenue is now running above $37 billion a year. Paid seats for its Microsoft 365 Copilot assistant have passed 20 million.

Microsoft is far from alone. Amazon has guided to roughly $200 billion in capital spending for 2026 and Alphabet to between $175 billion and $185 billion. Meta has pointed to a range topping out around $135 billion. Together, the largest cloud operators are on course to spend something close to $700 billion this year, an amount that dwarfs anything the industry committed before 2024.

Wall Street is not convinced

Investors have started to balk.

Microsoft shares closed on June 30 at $373.02, down 19 percent over the prior month and near a 52-week low, a slide that has erased close to $600 billion from the value of what is still an almost-$3 trillion company. The worry driving the selloff is straightforward. Wall Street is not sure the enormous sums flowing into data centers will generate the returns to justify them, and every dollar spent on infrastructure is a dollar not returned to shareholders through buybacks or dividends. Wedbush analyst Dan Ives, long one of the more bullish voices on Microsoft, has given pointed voice to that frustration.

The picture is not one-sided. Microsoft's contracted backlog, the revenue it has signed but not yet booked, reached $627 billion last quarter, up 99 percent from a year earlier, which points to real demand behind the spending. Supporters argue that pulling back on the buildout now would cede ground in a market Microsoft has spent years trying to lead, while skeptics counter that the payoff keeps receding even as the bills arrive on schedule.

The layoff report itself nudged the stock the other way. Microsoft climbed a little over 1 percent in premarket trading after the news, a sign that investors read cost discipline as reassurance, even when it arrives in the form of job losses.

AI has become the most-cited reason for cuts

Microsoft's move fits a pattern spreading across the technology sector, which has shed more jobs than any other this year. US tech companies have announced 123,653 cuts so far in 2026, up 66 percent from the same stretch of 2025, according to the outplacement firm Challenger, Gray & Christmas. AI has been the single most-cited reason for layoffs three months running. The 38,579 cuts tied to it in May were the most in any month since the firm began tracking the cause in 2023, and the technology has now been linked to 87,714 job losses this year, already past the 54,836 attributed to it in all of 2025.

The biggest names have all moved. Meta has cut about 8,000 jobs this year and Amazon around 16,000. Oracle went further, shedding some 21,000 roles, close to 13 percent of its staff, as it wove AI through its operations.

For the workers told this week to start looking, the contrast is jarring. One of the wealthiest companies on the planet is spending more than it ever has, and still found their roles expendable.

Not everyone accepts that AI is the real cause. In May, Nvidia chief executive Jensen Huang, whose company sells the chips underpinning the entire boom, dismissed the explanation as "lazy," arguing that companies have not yet deployed AI at anything close to the scale it would take to justify replacing large parts of their workforce.