Microsoft has confirmed its decision to lay off approximately 9,000 employees, marking its largest workforce reduction in over two years and the second major round of layoffs in 2025.
The cuts represent less than 4% of the company’s global workforce of 228,000 employees as of June 2024.
This move is part of a broader strategy to streamline operations, reduce management layers, and reallocate resources toward artificial intelligence (AI) and cloud infrastructure.
The layoffs span multiple divisions, including Xbox Gaming, sales, marketing, and product development, and affect employees across geographies and experience levels.
Microsoft Gaming Division Hit Hard: Xbox, King, and ZeniMax Impacted
One of the most affected areas is Microsoft’s Gaming division, which includes Xbox, King (Candy Crush developer), and ZeniMax Media.
Internal memos from Xbox CEO Phil Spencer acknowledged the difficult timing and emphasized the need to focus on strategic growth areas while removing layers of management to improve agility and effectiveness.
- King is reportedly cutting 200 roles, about 10% of its workforce
- ZeniMax Europe and other studios across North America and Europe are also facing reductions
- The layoffs follow Microsoft’s $75.4 billion acquisition of Activision Blizzard in 2023 and its earlier $7.5 billion purchase of ZeniMax Media
Despite record engagement in gaming, Phil noted that the company must “end or decrease work in certain areas” to ensure long-term success.
AI Pivot Drives Organizational Changes
Microsoft’s restructuring is closely tied to its aggressive push into AI and cloud technologies.
The company has invested tens of billions of dollars in data centers, specialized chips, and AI application development, with estimated expenses reaching $80 billion in the last fiscal year.
CEO Satya Nadella previously stated that 20–30% of code in some Microsoft projects is now written by software, fueling speculation that AI tools like GitHub Copilot may be reducing the need for human programmers.
The company’s Chief Financial Officer Amy Hood emphasized the goal of “building high-performing teams” and “reducing layers with fewer managers” to increase organizational agility.
Microsoft Layoffs Coincide with Start of Fiscal Year 2026
The timing of the layoffs aligns with the beginning of Microsoft’s fiscal year 2026, a period traditionally associated with organizational restructuring.
This latest round follows:
- 6,000 layoffs in May 2025, primarily in product and engineering roles
- 305 layoffs in June 2025
- Over 15,000 total job cuts since January 2024
Despite these reductions, Microsoft reported $25.8 billion in net income for its most recent quarter, reflecting 18% year-over-year growth.
Employee Support and Public Reaction
Affected employees are being offered severance packages, healthcare coverage, and job placement assistance, with priority consideration for other roles within Microsoft Gaming.
However, the layoffs have sparked public backlash, particularly around Microsoft’s continued H-1B visa applications, with critics questioning the rationale behind hiring foreign talent amid domestic job cuts.
Social media platforms have seen a surge in commentary, with some users labeling the layoffs as “economic treason” and calling for greater transparency in hiring practices.
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