Microsoft to Lay Off 9,000 Employees Across Divisions

On July 2, 2025, Microsoft announced it will cut around 9,000 jobs globally—about 4% of its 228,000 employees. This is the company’s largest round of layoffs in more than two years and the second in recent months. Layoff notices started going out on Wednesday and will impact several departments and regions, including the Xbox gaming unit and sales teams. About 830 of the affected employees are based at Microsoft’s headquarters in Redmond, Washington, according to company statements and state filings.

Microsoft described the layoffs as part of a larger organizational restructuring. In a statement, the company said it’s making changes to better position its teams for success in a fast-changing market. The gaming division will be affected, though not the majority of it. Xbox head Phil Spencer told employees in a memo that the changes are meant to ensure long-term success and focus on key growth areas. He also said Xbox will reduce layers of management to boost agility and effectiveness. This message echoed what CFO Amy Hood said during an April earnings call: the company is creating “high-performing teams” by cutting back on management layers.

There are several reasons behind the layoffs. CEO Satya Nadella said back in 2023 that after a surge in tech spending during the pandemic, customers are now trying to get more value for their money—forcing Microsoft to adjust its costs. At the same time, the company is investing heavily in artificial intelligence, pledging about $80 billion for AI infrastructure in its FY2025 budget. These AI investments are expensive and have put pressure on Microsoft’s profit margins, according to Reuters.

Industry analysts say Microsoft is trimming jobs in slower-growing areas to focus more on AI, cloud services, and next-gen products. Dan Ives of Wedbush Securities explained that Microsoft wants to cut costs in older areas like Xbox and put more resources into faster-growing tech. “They overhired over the years,” he said, and now it’s about boosting efficiency.

The Xbox division has been directly hit. Bloomberg reported that hundreds of employees in the gaming unit were laid off on Wednesday, and new game projects like Perfect Dark and Everwild were canceled. Spencer’s memo said work will stop or slow down in certain areas to concentrate on major franchises, again stressing a cut in management layers. This isn’t the first cut in gaming—back in January 2024, Microsoft laid off 1,900 employees from Activision Blizzard and Xbox, about 8% of its gaming division, just after acquiring Activision.

These layoffs come as part of a wider trend in the tech industry. Other big tech firms have also been downsizing. Meta (Facebook) is cutting about 5% of its staff, Google (Alphabet) has laid off hundreds, and Amazon has let go of thousands due to rising costs. Experts say that economic uncertainty and the high price of building AI infrastructure have led to widespread layoffs across U.S. companies. Since 2022, tens of thousands of tech jobs have disappeared, according to The Washington Post and Reuters. Microsoft’s latest cuts follow this pattern—downsizing after rapid growth during the pandemic and shifting focus to efficiency.