Microsoft preparing job cuts across sales, Xbox in new round of layoffs: Report

2 min readNew DelhiUpdated: Jul 1, 2026 09:28 AM IST

Satya Nadella, Microsoft’s chief executive, arrives to testify in Elon Musk’s lawsuit against OpenAI at the Ronald V. Dellums federal courthouse in Oakland, Calif., on Monday, May 11, 2026. (Jason Henry/The New York Times)

Microsoft is reportedly planning another round of layoffs that could potentially affect thousands of employees as it looks to manage costs and maintain its hefty AI investments.

The Windows-maker is moving to cut less than 2.5 per cent of its 220,000-person workforce, according to a report by Business Insider. The layoffs are expected to be announced next week and are set to impact thousands of roles in sales and consulting as well as Microsoft’s Xbox gaming division, as per the report.

Layoffs at Xbox have been expected since the gaming division’s new CEO, Asha Sharma, sent a memo to employees calling for a “reset” of the business. However, some of the affected employees are likely to be offered new roles immediately.

While the upcoming round of layoffs is smaller than previous years, it underscores Microsoft’s moves to rein in costs as it ramps up spending on AI. The company also faces pressure from investors over concerns that new and advanced AI tools could potentially replace traditional software services. which could include some of Microsoft’s key offerings.

Additionally, Microsoft is looking to balance the costs of internal AI use. It recently cancelled most of its direct Claude Code licenses, instead moving engineers toward using GitHub Copilot CLI, in part, due to financial considerations, according to The Verge.

Microsoft’s upcoming July layoffs would be in line with job cuts carried out during previous years. In 2025, Microsoft eliminated 6,000 roles in May and an additional 9,000 employees, or about 4 per cent of the company’s workforce, in July. Earlier this year, the company rolled out a voluntary retirement programme in the US which offers buyouts to employees level 67 and below who had 70 or more years of age and service.

While 9,000 US-based Microsoft employees were said to be eligible for the voluntary retirement programme, only one-third of them are said to have taken the buyout so far, as per reports.

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