Microsoft Lays Off 9,000 as AI Investments Trigger Largest Job Cuts Since 2023
Microsoft plans to cut 9,000 jobs, about 4% of its workforce, to reduce costs amid heavy AI investments. The gaming division will also see reductions as the company shifts focus.
Microsoft Cuts 9,000 Jobs to Streamline Operations Amid AI Spending
Microsoft announced plans to lay off 9,000 employees, about 4% of its 228,000-strong global workforce. This is the largest reduction since October 2023, when 10,000 roles were cut. The move aims to reduce costs as the company invests heavily in artificial intelligence (AI) infrastructure.
Strategic Restructuring to Support AI Investments
The timing of these layoffs, at the start of Microsoft’s 2026 fiscal year, reflects a strategic effort to reshape the organisation. A company spokesperson confirmed the cuts affect multiple international teams and experience levels. The goal is to simplify management layers between senior leaders and individual contributors, improving agility.
Microsoft has committed US$80 billion to AI projects in the current fiscal year. However, expanding AI capabilities has increased operational costs, pressuring margins, especially in its cloud business for the June quarter compared to last year.
Gaming Division Experiences Notable Impact
Phil Spencer, CEO of Microsoft Gaming, acknowledged workforce reductions in his division. He explained that some business areas will be scaled back or ended to focus on strategic growth and improve efficiency. The Barcelona-based King division, known for Candy Crush, will reduce its staff by approximately 200 positions, about 10% of its workforce. While the gaming division faces cuts, it is not the primary area affected.
Microsoft’s Layoffs Reflect Broader Tech Sector Trends
This latest round continues a pattern of job cuts throughout 2024 and 2025. Microsoft reduced over 6,000 roles in May, plus several hundred more in June, following earlier performance-based layoffs in January. Historically, Microsoft made significant cuts in 2014 after acquiring Nokia, eliminating 18,000 jobs.
Other major tech companies are also resizing their workforces. Meta cut roughly 5% of its lowest-performing staff, Google released hundreds of employees, and Amazon trimmed roles across divisions such as books and devices.
Will AI Drive Significant Job Losses?
Even profitable companies face workforce reductions as AI adoption grows. Dario Amodei, CEO of Anthropic, warns AI could eliminate half of entry-level white-collar jobs within a few years, potentially pushing unemployment to 10-20%. Sectors like technology, finance, law, and consulting are particularly vulnerable.
While AI currently assists with tasks like document summarisation, rapid advances may lead to full automation in the near future. Amodei estimates this shift could occur within a couple of years or less.
AI and Employees: Competition or Collaboration?
Some leaders remain optimistic about AI complementing human work. Zahra Bahrololoumi, CEO of Salesforce UK & Ireland, emphasises that AI should improve human productivity rather than replace workers. She highlights emerging roles such as prompt engineers and AI collaborators who enhance output quality.
Executives should consider both the risks and opportunities AI presents for workforce management and productivity enhancement. For practical AI training resources that can help leaders and teams adapt, visit Complete AI Training.
