Microsoft joins AI-driven tech layoff wave with nearly 4,800 job cuts

The software giant is cutting 2.1 per cent of its workforce as it invests heavily in AI infrastructure and seeks to improve efficiency across its businesses

Microsoft is cutting about 2.1 per cent of its workforce, or roughly 4,800 jobs, the latest in a wave of technology layoffs as the Windows maker spends heavily on artificial intelligence (AI) infrastructure and uses the technology to improve efficiency across its business.

 

Big Tech's AI spending, expected to exceed $700 billion this year, is increasing pressure on companies to demonstrate returns on those investments while offsetting the rising costs of deploying the technology. Amazon and Meta Platforms have also laid off thousands of employees this year.

 

Microsoft announced the cuts on Monday after a difficult first half, with its shares falling nearly 23 per cent in the first six months of 2026, their worst first-half performance since 2022.

   

The software giant earlier this year offered voluntary buyouts to about 7 per cent of its US workforce, or around 9,000 employees. Microsoft often trims jobs near the end of its fiscal year in June as it finalises spending plans for the new financial year.

 

Strong demand for AI has fuelled growth in Microsoft's Azure cloud computing business, which was the exclusive seller of OpenAI's models until April. However, the mounting cost of building data centres to support those services has put pressure on its cash flows.

 

The company, which is expected to report results later this month, forecast quarterly Azure revenue above Wall Street estimates in April. It also projected capital expenditure of $190 billion for 2026, far exceeding analysts' expectations.

 

AI tools that increasingly automate routine business tasks have also emerged as a challenge to Microsoft's software business. At the same time, a surge in memory chip prices driven by data centre demand has forced the company to raise Xbox console prices when demand for the gaming console was already weak.

 

The gaming division's new head, Asha Sharma, said last month that the business needed a "reset" and that its profit margin had declined to 3 per cent, necessitating a restructuring that could include potential mergers and acquisitions (M&A).

 

"Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform and hardware subsidy, but our annual revenue has declined nearly half a billion during that time," she said in a memo to employees published on Microsoft's website. "Going forward, this cannot continue."

 

The company is considering options for the Xbox gaming unit, including a potential spin-off or restructuring as a wholly owned subsidiary, The Information reported last month.