Microsoft is preparing another round of job cuts, with an announcement expected as early as next week, according to reports. Thousands of employees across several teams are likely to be affected, even as the company continues to spend billions of dollars on artificial intelligence infrastructure and products.
The latest cuts are expected to impact the Xbox gaming business, along with sales and consulting teams. Reports suggest the reduction will affect less than 2.5% of Microsoft's global workforce of around 220,000 employees. Some workers may get opportunities to move into other roles inside the company.
The move shows a wider shift inside the technology industry. Companies are cutting costs in traditional businesses while expanding investment in AI, cloud infrastructure, and advanced computing.
Microsoft has emerged as one of the biggest investors in artificial intelligence. It has expanded data centres, strengthened its cloud business, and integrated generative AI into several products.
That strategy is also changing hiring priorities. Money is moving towards AI engineering, cloud infrastructure, and semiconductor capabilities. At the same time, several business functions are facing restructuring and lower headcounts.
This is not Microsoft's first workforce reduction. The company cut around 6,000 jobs last year. Another 9,000 employees lost their positions later in the year, making it one of Microsoft's biggest rounds of layoffs in recent years.
Earlier this year, Microsoft also offered a voluntary retirement program in the United States. Around 9,000 employees qualified under the scheme, and nearly one-third accepted it. Reports indicate the program helped reduce the scale of compulsory layoffs planned this year.
The Xbox division is expected to see another round of restructuring. The gaming business has faced pressure from slowing console sales and weaker-than-expected Game Pass growth. Microsoft has also closed game studios, cancelled projects, and raised console prices over the last two years.
Reports have also suggested Microsoft is reviewing long-term options for Xbox, including changes to its business structure. The latest layoffs are expected to fit into that broader restructuring effort.
The gaming business still holds strategic value for Microsoft, though the company appears focused on improving efficiency before making its next phase of investments.
Microsoft is far from alone. Several global technology companies have announced workforce reductions this year while increasing spending on AI.
Many companies hired aggressively during the pandemic when digital demand surged. Business priorities have shifted since then. Investors are also pushing companies to improve profitability while funding expensive AI expansion.
The trend is spreading outside the technology sector as well. Volkswagen is considering one of the largest restructuring exercises in its history as competition, electric vehicle investments, and automation reshape its business.
The current wave of layoffs does not point to a collapse in hiring. It reflects a shift in the type of talent companies want. Recruitment continues for artificial intelligence, cybersecurity, cloud computing, semiconductor design, and data engineering roles. Routine business functions are seeing slower hiring, while technical and specialised positions continue to attract investment.
Industry experts also point out that AI has not replaced skilled professionals in many fields. Human oversight continues to play a critical role in software development, customer support, legal services, and healthcare.
For job seekers, the message is becoming clearer with every round of layoffs. Technical knowledge alone is not enough. Professionals who are learning AI tools, updating their skills regularly, and adapting to the changing business needs are likely to find stronger opportunities even as companies become more selective in hiring.
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