Microsoft Cuts 4,800 Jobs Amid Restructuring, Denies AI Replacements

Microsoft announced layoffs of approximately 4,800 employees, representing about 2.1% of its workforce, as part of a restructuring effort affecting its commercial divisions and Xbox gaming unit. The move is part of broader cost-cutting measures amid heavy investments in artificial intelligence (AI) infrastructure and declining stock performance.

Amy Coleman, Microsoft’s Chief Human Resources Officer, emphasized in a memo to staff that the job cuts are not due to AI replacing workers, stating, "The roles eliminated today are not being replaced by AI." However, she acknowledged that AI is changing how work is done, prompting the company to realign its organizational structure and resources to new priorities.

This announcement follows a nearly 23% drop in Microsoft’s stock price during the first half of 2026, marking its worst performance since 2022. Earlier this year, Microsoft offered voluntary retirement to about 9,000 U.S.-based employees as part of its efficiency drive ahead of the new fiscal year.

Despite workforce reductions, Microsoft plans to increase capital expenditures to around $190 billion in 2026, primarily for building data centers to support Azure cloud services and AI systems. Azure continues to see strong demand, though the high costs of cloud infrastructure impact cash flow.

The Xbox division is also undergoing challenges, with new head Asha Sharma warning of the need for a "reset" after profit margins shrank to about 3%. Microsoft has invested over $20 billion in content, platforms, and hardware subsidies over five years, yet annual revenues have declined by roughly half a billion dollars. Sharma told employees, "This cannot continue going forward."