Microsoft Announces Layoffs Affecting 2.1% of Its Global Workforce

On July 6, 2026, Microsoft announced to cut around 4,800 jobs, or about 2.1% of its global workforce, as the company continues to reorganise its business while making large investments in artificial intelligence (AI).

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The layoffs will affect multiple teams across the company, with the biggest impact on its Xbox gaming business. Around 3,200 positions will be eliminated from the gaming division, including nearly 1,600 employees who will be affected immediately.

The company said the decision is part of a broader organisational restructuring aimed at simplifying operations and aligning resources with future business priorities.

Xbox Business Undergoes Major Changes

Microsoft is making significant changes to its gaming business following the acquisition of Activision Blizzard.

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As part of the restructuring, Compulsion Games, the studio behind South of Midnight, and Double Fine Productions, known for Psychonauts, will become independent studios.

At the same time, Ninja Theory and Undead Labs will be spun off to focus on expanding their flagship franchises, Senua and State of Decay 3, respectively.

The management of Arkane Studios, which developed Dishonored and is currently working on a game based on Marvel’s Blade character, has also started consultations with its workers’ union in France to review options for the studio.

AI Investments Continue

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Microsoft has been investing billions of dollars in AI infrastructure, including data centres and cloud services. The company has made AI a key part of its long-term growth strategy and continues to expand its AI capabilities across products and services.

The company said the layoffs are part of organisational changes and are not directly linked to AI replacing employees.

Also Read: IBM Expands watsonx Orchestrate for Enterprise AI Agents

However, rising spending on AI infrastructure has increased pressure on costs, leading many technology companies to review their workforce and business operations.

Part of a Larger Industry Trend

Microsoft joins several other technology companies that have announced job cuts while increasing investments in AI.

Across the industry, companies are reducing costs, restructuring teams, and shifting resources towards AI, cloud computing, and automation.

The latest round of layoffs reflects how large technology companies are balancing heavy AI investments with efforts to improve efficiency and prepare for future growth.

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