Layoffs target gaming and global divisions as AI investments climb
Microsoft is laying off approximately 9,000 employees, marking its largest round of job cuts in over two years. The move, which affects about 4% of the company’s workforce, is part of a broader restructuring effort aimed at streamlining operations and focusing resources on artificial intelligence and cloud computing.
Among those impacted are 830 workers at Microsoft’s Redmond, Washington headquarters, according to a notice filed with state officials. The layoffs extend across various global teams, including the Xbox gaming division and the company’s sales organization.
In a memo to gaming employees, Xbox CEO Phil Spencer said the cuts are designed to position the division for “enduring success” by removing management layers to boost agility and focus on strategic growth. This comes after Microsoft’s recent $75.4 billion acquisition of Activision Blizzard and its earlier $7.5 billion purchase of Bethesda’s parent company ZeniMax Media.
Second major layoff in two months
Wednesday’s cuts follow a May layoff of 6,000 workers — nearly 3% of Microsoft’s workforce at the time. Including a smaller round in June, this marks the company’s third round of layoffs in 2024. While Microsoft had 228,000 full-time employees as of June 2024, these ongoing reductions suggest it has likely shed more headcount than it has replaced.
Microsoft said the layoffs were part of “organizational changes” needed to navigate a dynamic market environment. CFO Amy Hood previously emphasized that the company is building “high-performing teams” and reducing management layers to improve efficiency.
Shifting priorities amid AI expansion
The company is simultaneously investing heavily in artificial intelligence infrastructure, with more than $80 billion expected to go toward data centers, specialized chips, and related technologies in the last fiscal year alone. CEO Satya Nadella has indicated that AI is already generating code for a significant portion of Microsoft’s software projects — a shift that some fear could reduce demand for human engineers.
Despite these concerns, analysts view the layoffs as a strategic rebalancing. “They’re focused more and more on AI, cloud and next-generation Microsoft,” said Dan Ives of Wedbush Securities. “This is Nadella and team making sure they’re keeping with efficiency — that’s the name of the game in Wall Street.”
Xbox staff hit hard despite recent gaming push
The layoffs have hit Xbox particularly hard, even as Microsoft recently expanded its gaming footprint. Several affected employees from Activision and Bethesda subsidiaries posted on social media about being laid off and searching for new opportunities. The job losses come just months after Microsoft completed its acquisition of Activision Blizzard, home to Call of Duty and Candy Crush franchises.
While the company declined to provide further comment beyond confirming the layoffs, Spencer said that aligning teams to Microsoft’s strategic priorities was necessary to maintain competitiveness in a fast-changing industry.
