Microsoft reportedly makes another brutal workforce move
The AI boom created a ton of winners on Wall Street. However, it also created an incredibly unforgettable story for workers. Tech behemoth Microsoft (MSFT) is reportedly preparing a fresh round of layoffs, according to Business Insider, in a move that could be announced as early as next ...
Overview
The AI boom created a ton of winners on Wall Street. However, it also created an incredibly unforgettable story for workers.
Tech behemoth Microsoft (MSFT) is reportedly preparing a fresh round of layoffs, according to Business Insider, in a move that could be announced as early as next week.
In reporting the news, Reuters said it could not immediately verify the details, but GeekWire said it confirmed the plan with a person familiar with the matter.
Nonetheless, the reported cuts land in the middle of a darker Big Tech narrative.
Companies continue spending heavily on AI while asking whether they still need the headcount to grow.
According to Reuters, citing Morgan Stanley, Alphabet, Amazon, Microsoft and Meta are expected to spend about $700 billion in outlays in 2026 as hyperscaler AI capex grows at a relentless pace.
Hence, Microsoft is no exception, with major bets on cloud, data centers, and AI tools reshaping its cost structure, while reported layoffs have become another sign of how expensive the AI era is becoming.
What the Microsoft layoff reports say
According to a Business Insider report, Microsoft is planning to cut thousands of jobs, impacting less than 2.5% of its workforce, with roles across sales, consulting and Xbox.
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Interestingly, the cuts came just after Microsoft’s June 30 fiscal-year close, a period when it typically makes organizational changes.
With 228,000 full-time employees as of June 30, 2025, a sub-2.5% reduction still means thousands of workers.
Recently, Meta Platforms also gave the AI-led tech layoff theme more weight.
According to Reuters, Meta carried out a massive restructuring on May 20, laying off 10% of its global workforce while transferring 7,000 employees to new AI-related workflows.
Similarly, Microsoft is also looking to exercise that same cost discipline, despite posting strong top-and-bottom-line growth over the past several quarters.
In fiscal Q3, according to Yahoo Finance, Microsoft revenue rose 18%, operating income increased 20%, Microsoft Cloud revenue reached $54.5 billion, and Azure and other cloud services revenue jumped 40%.
However, AI growth doesn’t come cheap.
Microsoft said cloud gross margin dropped to 66% because of AI infrastructure investments and higher AI usage. GeekWire also reported the company was on pace to spend more than $100 billion on AI and cloud infrastructure in the fiscal year that just ended.
Details
Additionally, Xbox adds another pressure point. Reported cuts could reach gaming after Microsoft said Xbox content and services revenue fell 5% in fiscal Q3.
Big Tech layoffs show AI’s growing workforce cost
Microsoft’s reported cuts aren’t happening in isolation.
Across Big Tech, companies continue trimming headcount while redirecting capex toward AI infrastructure, automation and leaner operating structures.
- Amazon: On Jan. 28, 2026, Reuters said Amazon confirmed 16,000 corporate cuts, following 14,000 October layoffs partly tied to AI adoption and bureaucracy reduction.
- Oracle: On June 22, 2026, Reuters reported Oracle’s workforce fell by 21,000, or 13%, in fiscal 2026, partly driven by AI adoption.
- Meta Platforms: On May 18, 2026, Reuters reported Meta’s May 20 restructuring included 10% layoffs, 7,000 staff shifted to AI initiatives, and 6,000 open roles closed.
- Microsoft: On July 2, 2025, Microsoft said it would cut nearly 4% of staff while continuing heavy AI infrastructure spending, according to Yahoo Finance.
- Salesforce: On Feb. 10, 2026, Reuters reported Salesforce cut fewer than 1,000 jobs, including roles linked to its Agentforce AI push.
How Satya Nadella and Big Tech CEOs view AI’s impact on jobs
Microsoft CEO Satya Nadella frames Microsoft’s layoffs as the uncomfortable side of a company doing well while remaking itself for AI.
For context, according to CNBC, in a July 2025 employee memo published by Microsoft, he wrote that recent job eliminations had been “weighing heavily on me” and called them “among the most difficult” decisions the company makes.
In doing so, he also acknowledged the contradiction, saying Microsoft was thriving by market and strategic measures while still undergoing layoffs.
He argued that progress in tech is “dynamic, sometimes dissonant, and always demanding" and said Microsoft needs to scale its current business and create new AI categories.
Nadella’s AI vision is expansive.
For him Microsoft needs to evolve from being a “software factory” to an “intelligence engine", which is why it continues shelling out billions on AI infrastructure even while reducing headcount in other areas.
Putting things in perspective, Microsoft’s capex has exploded with the AI buildout.
In fiscal 2022, Microsoft reported $23.9 billion in additions to property and equipment; through the first 9 months of fiscal 2026 alone, that figure had reached $80.1 billion, up about 236% from the full-year 2022 level.
Other tech leaders are drawing with the same map.
Amazon CEO Andy Jassy told employees that generative AI would change how work gets done and said the company expected it to “reduce our total corporate workforce” as AI drives efficiency.
Reuters reported Jassy saying some roles would become obsolete while new ones would emerge.
OpenAI CEO Sam Altman has sounded less alarmist recently.
Reuters reported in May 2026 that Altman said AI had not created the white-collar job losses he once feared and was unlikely to trigger a global “jobs apocalypse". Anthropic CEO Dario Amodei remains more cautious, warning through Axios that AI could push unemployment sharply higher in the next 1 to 5 years.
Related: Microsoft may be done making Xbox cheap
Source
Originally published at www.thestreet.com.
