Microsoft announced on Wednesday it will lay off approximately 9,000 employees worldwide, affecting nearly 4% of its global workforce across multiple teams, geographies, and experience levels. The cuts represent Microsoft's largest workforce reduction since 2023 and mark the company's second major layoff wave in 2025, following the elimination of around 6,000 positions in May.
The timing is strategic, coinciding with the start of Microsoft's 2026 fiscal year as the company continues to implement organizational changes aimed at streamlining operations. "We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace," a Microsoft spokesperson confirmed.
These workforce reductions come as Microsoft maintains its ambitious $80 billion capital expenditure commitment for fiscal year 2025, primarily focused on developing AI infrastructure. The company is targeting management layers between individual contributors and senior executives, aiming to create a flatter organizational structure with fewer managers.
The financial pressure driving these cuts is evident in Microsoft's recent performance indicators. The soaring costs of scaling AI infrastructure have begun weighing on the company's margins, with its June quarter cloud margin expected to shrink compared to 2024. This creates tension between Microsoft's growth ambitions in AI and the need for cost management.
Microsoft's approach mirrors similar actions across the technology sector. Meta announced plans to trim approximately 5% of its "lowest performers" earlier this year, while Google has laid off hundreds of employees. Amazon has also reduced headcount across multiple business segments. Industry analysts suggest these workforce adjustments reflect a fundamental shift as companies reallocate resources toward AI development while optimizing their existing operations.
The gaming division has not been spared, with Xbox leader Phil Spencer acknowledging the impact on his team in an internal memo. Despite the cuts, Microsoft continues to position itself as a leader in the AI race, with CEO Satya Nadella describing the company as a "distillation factory" for artificial intelligence, transforming large models into specialized, task-specific applications across its product portfolio.