Microsoft Announces Largest Layoff in Two Years

Microsoft has initiated its largest round of layoffs in two years, confirming on July 2 that approximately 9,100 employees will lose their jobs. 

This latest move, which affects about 4% of its global workforce, follows a similar round of 6,000 layoffs in May and marks the company’s fourth major reduction since early 2023.

According to internal sources and company filings, the decision stems from Microsoft's ongoing effort to restructure itself around artificial intelligence and cloud computing—sectors CEO Satya Nadella has repeatedly described as “the company’s future.” In official statements, Microsoft said the cuts are part of a "strategic realignment" aimed at streamlining operations, eliminating unnecessary management layers, and prioritizing engineering and product development roles in AI-related initiatives.

The layoffs have hit several departments, but the most visible and controversial impact is within Microsoft's gaming division. 

Hundreds of employees across Xbox Game Studios, including teams at Rare, The Initiative, and Turn 10, have been let go. Multiple game development projects, including anticipated titles like Perfect Dark and Ever-wild, have been shelved indefinitely. Most notably, The Initiative, a Santa Monica-based studio launched with great fanfare in 2018, has been officially shut down.

Beyond gaming, Microsoft’s global sales and marketing divisions are undergoing extensive downsizing. Insiders report that around 45,000 roles are being reevaluated for redundancy, with many layoffs concentrated in customer engagement, partner support, and regional sales operations. 

Judson Althoff, Microsoft's Chief Commercial Officer and a central figure in its global enterprise strategy, is said to be taking a sabbatical as the company recalibrates its commercial strategy.

The cuts are not limited to front-facing roles. Internal administrative functions, cybersecurity teams, and mid-level management have also been significantly affected. Employees described an increasingly algorithmic and impersonal layoff process, with performance data playing a central role in termination decisions. Some roles, particularly those tied to legacy services and slower-growing segments, are being eliminated entirely rather than relocated.

Despite these significant reductions, Microsoft's financial performance remains strong. The company posted \$70 billion in revenue last quarter and nearly \$26 billion in net profit, reflecting robust demand for Azure cloud services and enterprise productivity tools. 

However, with competitors like Google and Amazon also investing aggressively in AI infrastructure, Microsoft appears determined to optimize its workforce for what it sees as the next wave of computing.

Reactions within the company have been mixed. Some employees see the shift as a necessary evolution, while others express concern over morale, especially among creative teams in the gaming division. Anonymous posts on internal forums have criticized the process as “cold,” “data-obsessed,” and “disconnected from the human side of innovation.”

This wave of layoffs follows similar reductions in January 2023, early 2024, and May 2025, showing a consistent pattern of Microsoft trimming personnel while doubling down on automation, machine learning, and next-gen computing platforms. Industry analysts point out that while such shifts may boost efficiency and investor confidence in the short term, they risk undermining the company's diversity of talent and long-term creative capacity—especially in areas like gaming and customer engagement, where trust and innovation are paramount.

Microsoft has promised to support affected employees with severance packages, career placement assistance, and reskilling programs, though details vary depending on region and role. For now, the company’s internal message is clear: AI is the priority, and everything else must adapt—or be left behind.