Microsoft plans fresh layoffs, cutting over 5,500 jobs across Xbox, sales teams: Report

Microsoft is reportedly eyeing a new round of layoffs, cutting over 5,000 jobs across the various divisions in a bid to manage hefty costs and AI-based investments.

According to a report published by Business Insider, the company is set to lay off 5,500 employees, thereby impacting 2.5 percent of its 220,000-person workforce.

The Windows-maker will announce the fresh layoffs in the coming week. The affected division will include the employees from Xbox gaming, sales and consulting roles.

For the Xbox gaming division, the announcement of layoffs is not much shocking as after taking over the division, the new CEO Asha Sharma sent a memo to the staff, calling for “a reset of the business.” It is also reported that affected employees would be given new roles forthwith.

Microsoft’s recent layoff move comes as the company is grappling with soaring AI costs even surpassing the budgetary limits. The tech company in May decided to revoke its internal Claude code license along with its Experiences and Devices division ending access by June 30, 2026.

This year’s reductions follow a more significant period of contraction in 2025. Last year, Microsoft also cut off 6,000 roles in May followed by an additional 9,000 employees in July.

For the first time, the company also offered a voluntary retirement program. Approximately one-third of the 8,750 eligible US employees accepted, allowing the company to execute a smaller scale of involuntary layoffs compared to the previous year.

At the same time, Microsoft continued to spend more on AI and cloud infrastructure as spending has reached to $100 billion during this fiscal year.