Microsoft is cutting about 4,800 jobs, or 2.1 percent of its global workforce, the company said Monday, the largest single round of layoffs at the software maker this year as it pours money into artificial intelligence infrastructure. The cuts hit the company’s Xbox gaming unit and its commercial sales organization, according to an internal memo from Chief People Officer Amy Coleman. Microsoft’s stock has fallen nearly 23 percent in the first half of 2026, the worst first-half performance since 2022.
The announcement comes two months after Microsoft said it would spend about $190 billion on capital projects in 2026, mostly AI data centers, a figure that blew past analyst estimates. It also follows an April amendment to the company’s long-running partnership with OpenAI that let the AI lab deploy its models on rival clouds for the first time. The memo to employees, obtained by multiple outlets, said the company would continue to explore voluntary retirement approaches in the future. The cuts are the latest evidence of a wider squeeze in Big Tech, where capital spending on AI is at record highs while consumer software and hardware businesses feel the cost of the same supply chain.
Microsoft Cuts 4,800 Roles as the AI Spending Bill Comes Due
Microsoft will eliminate around 4,800 positions, or about 2.1 percent of its roughly 220,000-person global workforce, the company said in a memo to staff on Monday, July 6. The company had more than 220,000 employees before the cuts, and the memo said most of the affected roles sit in the Xbox gaming business and the Microsoft Commercial sales organization. Coleman’s email was obtained by Business Insider, the BBC, and other outlets.
The round of cuts lands in the first week of Microsoft’s new fiscal year, a window the company has used before to trim headcount. Last year, Microsoft eliminated around 6,000 roles in May and cut an additional 9,000 employees in July, about 4 percent of its workforce. Before Monday’s round, the company had already offered a one-time voluntary retirement package to about 9,000 U.S. staff, roughly 7 percent of its domestic headcount, and more than 30 percent of eligible workers took it. The company called the result “in line with expectations.”
Coleman framed the cuts as a realignment of resources toward AI and the company’s “highest priorities.” She added that Microsoft had redeployed more than 4,000 employees into new roles over the past year, including 500 this month.
- 4,800 roles eliminated Monday
- 2.1% of Microsoft’s global workforce
- 3,200 additional Xbox cuts planned by end of FY27
- 1,600 of those Xbox cuts hit on July 6
- ~$190 billion in Microsoft 2026 capex guidance
- 9,000 U.S. staff offered voluntary buyouts earlier in 2026
Coleman’s Memo Names the Trade-Off
Coleman’s email to employees was unusually direct on a question that has hung over every Big Tech layoff this year: whether the workers being let go are being replaced by AI. She wrote that they are not, and pointed instead to a realignment of resources toward the company’s “highest priorities and greatest areas of opportunity.” The voluntary retirement program, in which more than 30 percent of eligible employees participated, was framed as the model Microsoft wants to keep using. Coleman added that the company had redeployed more than 4,000 employees into new roles over the past year, including 500 in July alone.
Today we are eliminating around 4,800 roles, about 2.1% of our global workforce, as we focus our people, investments, and energy on the priorities that will keep Microsoft positioned to deliver for customers in a fast-changing industry. The people whose jobs are impacted today are our colleagues and friends.
Coleman also warned that the cut is a first step. “Other parts of our business will need to make similar changes,” she wrote. The company said it would continue to invest in retraining, including in AI, for the employees who remain.
Xbox Takes the Deepest Cuts in a Reset
The hardest-hit piece of Microsoft on Monday is Xbox, the gaming business the company spent years building into a cross-platform powerhouse through multibillion-dollar studio deals. Asha Sharma, who took over as head of Xbox this year, said in a memo that the unit will shed around 3,200 jobs in the current fiscal year, which runs through June 2027. About 1,600 of those cuts land on Monday, and four Xbox studios, Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs, will move to independent management “with the goal of preserving both their intellectual property and ongoing projects.”
Sharma’s memo, the most candid internal statement Microsoft has issued on Xbox in years, sketches a unit under real strain. Xbox revenue fell 5 percent in the quarter that ended in March, and Sharma said the unit’s profit margin had slipped to 3 percent. Excluding the Activision Blizzard King acquisition, Microsoft has spent more than $20 billion over the past five years on content, platform, and hardware subsidy, while the unit’s annual revenue has declined by nearly half a billion dollars over the same period.
Excluding Activision Blizzard King, over the past five years, we have spent over $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.
Sharma framed the cuts as a return to focus, and pointed at a headcount that had outrun the player base. She noted that Xbox’s teams are 40 percent larger than they were when the company’s most recent consoles launched in 2020, despite a shrinking player base. Sharma also pointed at a hardware squeeze that has nothing to do with the AI build-out, the same memory chip shortage that is reshaping the rest of consumer electronics. The console price hike Microsoft announced in June is the most visible piece of that story.
| Big Tech firm | 2026 capital expenditure | 2026 layoffs announced |
|---|---|---|
| Microsoft | ~$190 billion | 4,800 (July 6), plus 3,200 more at Xbox by FY27 |
| Meta | $125 billion to $145 billion | ~8,000 (10% of staff, May 2026) |
| At least $180 billion | Not announced in 2026 | |
| Amazon | Q1 alone: $43 billion | Not announced in 2026 |
The $190 Billion Anchor Behind the Cuts
The layoff memo lands in a year Microsoft has already told investors to expect record capital spending. In April, the company guided to about $190 billion in 2026 capital expenditure, roughly 23 percent higher than the prior analyst consensus of $147 billion. Microsoft spent $31.9 billion in the first three months of 2026 alone, up 49 percent from a year earlier, and said spending was likely to pick up to more than $40 billion in the current quarter.
The total bill across the four largest U.S. tech firms is on track to top $700 billion in 2026. Amazon, Google, Microsoft, and Meta together plowed $130.65 billion into capital expenditure in the first quarter, more than three times the inflation-adjusted cost of the Manhattan Project, according to Big Tech’s first-quarter $130.65 billion AI capex. Microsoft’s piece of that is anchored to Azure, the cloud platform that, until April, was the exclusive home of OpenAI’s models. That changed on April 27, when Microsoft and OpenAI amended the partnership to let OpenAI deploy on any cloud, while keeping Microsoft’s license to OpenAI’s intellectual property through 2032 on a now non-exclusive basis.
Azure itself grew about 40 percent in the most recent quarter, and Microsoft said it could have grown faster if it had more data center capacity. CEO Satya Nadella said the company was investing to handle increased use as AI systems experienced “exponential” improvements.
The capex is also the most concrete way to read Coleman’s framing: Microsoft is reallocating people from the businesses that do not directly feed the AI build-out, and the consumer side of the company is where that reallocation cuts deepest.
From Cloud to Console, the Consumer Side of the Squeeze
Two months before the layoff memo, Microsoft raised Xbox console prices worldwide, effective August 1, 2026. The 512GB models are going up by $100, the 1TB models by $150, and the 2TB Series X is being discontinued. Microsoft said console storage and memory prices have increased by more than 2.5x, and warned the company expects another doubling by the fall of 2027.
The Xbox price hike is the most visible piece of a consumer squeeze that has been building across the company’s hardware and software lines since the spring. The same component crunch is hitting Apple’s hardware business, and other Microsoft products are also raising prices. Microsoft 365 commercial prices rose on July 1, 2026, across Business, Enterprise, Frontline, and Government suites, with new AI and security features bundled in.
The pattern, taken together, is the consumer side of the same AI capex story that is reshaping Microsoft’s workforce.
- August 1, 2026: Xbox 512GB consoles rise $100, 1TB consoles rise $150; 2TB model discontinued.
- July 1, 2026: Microsoft 365 commercial prices rise across Business, Enterprise, Frontline, and Government suites.
- June 25, 2026: Apple raises MacBook and iPad prices, hours before Microsoft’s Xbox announcement.
- Memory pricing: console storage and memory prices up more than 2.5x in 2026, with Microsoft expecting another doubling by fall 2027.
- Xbox content spend: more than $20 billion over five years (excluding Activision) against a revenue base that has declined by nearly half a billion dollars.
Big Tech’s Wider AI Layoff Wave
Microsoft is not alone. Meta laid off around 8,000 employees in May, about 10 percent of staff, even as it raised its 2026 capex forecast to between $125 billion and $145 billion. In the same call, Mark Zuckerberg told investors the company was reorganizing around AI. The first quarter of 2026 also brought cuts at Amazon, Coinbase, Google, and Block, and the global AI-driven layoff count passed 2025’s full-year total by July 1, 2026, according to one running tally.
The companies keep generating record cash from ads, cloud, and e-commerce, and they are spending it on AI infrastructure faster than they are hiring humans to operate it. Microsoft is scheduled to report its fiscal fourth-quarter results later this month, and investors will be watching both the capex line and the headcount number. Coleman’s memo warned that “other parts of our business will need to make similar changes.”
Frequently Asked Questions
How many people is Microsoft cutting?
Microsoft said on Monday, July 6, 2026, that it would eliminate around 4,800 jobs, about 2.1 percent of its global workforce, in a memo to staff from Chief People Officer Amy Coleman. The cuts are concentrated in the Xbox gaming business and the Microsoft Commercial sales organization.
Are the eliminated roles being replaced by AI?
No, not directly, according to Coleman’s memo. She wrote that “the roles eliminated today are not being replaced by AI,” while adding that AI is changing how the remaining work gets done and that employees will need to keep building new skills. Microsoft said it had redeployed more than 4,000 employees into new roles over the past year, including 500 in July alone.
How much is Microsoft spending on AI infrastructure?
Microsoft has guided to about $190 billion in capital expenditure for 2026, roughly 23 percent higher than the prior analyst consensus of $147 billion, with most of the spend going into AI data centers. The company spent $31.9 billion in the first three months of the year, up 49 percent from a year earlier. The four largest U.S. tech firms together are on track to spend roughly $700 billion in 2026.
What is happening to Xbox?
Xbox is taking the deepest cuts in the round. Asha Sharma, the head of Xbox, said the unit will shed around 3,200 jobs through the end of fiscal 2027, with 1,600 of those cuts effective July 6. Four Xbox studios, Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs, will move to independent management. Xbox revenue fell 5 percent in the quarter that ended in March, and Sharma said the unit’s profit margin had slipped to 3 percent.
Are other big tech companies laying off workers in 2026?
Yes. Meta laid off around 8,000 employees in May, about 10 percent of its staff, while raising its 2026 capex forecast. Amazon, Coinbase, Google, and Block have also announced cuts in 2026, and the global AI-driven layoff count passed 2025’s full-year total by July 1, 2026.
