Satya Nadella-led Microsoft is cutting about 2.1% of its workforce, or roughly 4,800 jobs, the latest in a wave of global tech layoffs as the Windows maker spends heavily on AI infrastructure, with the ultimate goal of using the technology to improve efficiency across its business.
Big Tech’s historic AI outlays, set to top USD 700 billion in 2026, are piling pressure on companies to show returns from the technology and offset the rising cost of rolling it out across their businesses. Amazon and Meta Platforms have already laid off thousands of employees in the past couple of months. For Microsoft, the job cuts also arrive amid a downfall in its shares, which, in the first six months of 2026, have gone down nearly 23%, in the tech giant’s worst first-half performance since 2022.
The software major, earlier in 2026, offered voluntary buyouts to about 7% of its US workforce, or about 9,000 employees. Microsoft is known for its repeated practice of trimming jobs near the end of its fiscal year in June, before setting spending plans for the new year.
“Booming AI demand has powered growth at Microsoft’s Azure cloud-computing business, which was the exclusive seller of OpenAI’s models until April, but the mounting cost of building data centers to run those services is squeezing its cash flows,” reported Reuters.
Microsoft, which will likely report its results later this month, had in April forecasted quarterly Azure sales above Wall Street estimates but also issued a USD 190 billion spending projection for 2026 that massively surpassed expectations.
As per the tech giant’s estimates, AI tools that can increasingly automate routine business tasks have also emerged as a threat to its lucrative software business, while a surge in memory chip prices driven by data center demand has forced the venture to raise Xbox console prices at a time when demand for the console was already soft. The fallout of the second move, as per the analysts, will most likely weigh on the company’s earnings.
The gaming division’s new head, Asha Sharma, recently said the business needed a “reset” and that its profit margin had declined to 3%, forcing a restructuring that could include potential M&A.
“Excluding Activision Blizzard King, over the past five years, we have spent over USD 20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue,” she remarked.