Microsoft announced in July 2026 that it is laying off approximately 4,800 employees — roughly 2.1 percent of its total workforce — as the company begins its new financial year. The cuts follow a round of approximately 9,100 layoffs made one year earlier.
The majority of the affected roles are in Microsoft’s commercial sales business and its Xbox division. Around 1,600 Xbox employees are being let go immediately, with the company planning to eliminate a total of approximately 20 percent of Xbox jobs by the end of the financial year. Microsoft is also selling off four Xbox studios and considering the sale of another as it looks to reset its Xbox business following years of struggles.
Amy Coleman, executive vice president and Microsoft’s chief people officer, addressed employees in an internal memo, citing a changing technology industry and the need to “adjust resources and roles and shift how we operate” in response to AI’s impact on the company. Coleman was direct that the eliminated roles are not being replaced by AI, while acknowledging that “AI is changing how work gets done.”
Prior to the cuts, Microsoft attempted to reduce the scale of layoffs through a voluntary retirement program open to US employees whose combined age and years of service totaled 70 or more. The package included five years of healthcare coverage, a lump sum cash severance payment, and six months of vesting for unvested stock options. Coleman said more than 30 percent of eligible employees chose to participate. The company also redeployed more than 4,000 employees into new roles over the past year, including 500 in the current month.
The layoffs suggest Microsoft is continuing to restructure its workforce at significant scale, with the Xbox division in particular facing a substantial reduction that may reshape the company’s gaming operations through the remainder of the financial year.
Source: The Verge