Microsoft to cut 4,800 jobs as AI spending reshapes workforce

SEATTLE: Microsoft will cut about 4,800 jobs, or roughly 2.1 per cent of its global workforce, the company said on Monday, becoming the latest technology giant to reduce headcount as it ramps up spending on artificial intelligence (AI) infrastructure while using the technology to improve efficiency across its operations.

The layoffs come as major technology companies invest heavily in AI, with industry-wide spending expected to exceed $700 billion this year. Companies including Amazon and Meta Platforms have also announced thousands of job cuts in recent months as they seek to offset the soaring costs of AI development.

Microsoft’s announcement follows a difficult first half of 2026, during which its shares fell nearly 23 per cent, marking their worst first-half performance since 2022.

Earlier this year, the software maker offered voluntary buyouts to around 7 per cent of its US workforce, or about 9,000 employees. The company has traditionally adjusted its workforce at the end of its fiscal year in June as it finalises spending plans for the new financial year.

Strong demand for AI services has continued to drive growth in Microsoft’s Azure cloud computing business, which until April was the exclusive provider of OpenAI’s models. However, the enormous cost of building and expanding data centres to support AI services has put pressure on the company’s cash flow.

Microsoft, which is expected to report quarterly earnings later this month, forecast Azure revenue above Wall Street expectations in April. At the same time, it projected capital expenditure of about $190 billion for 2026, far exceeding analysts’ estimates.

The rapid adoption of AI tools capable of automating routine workplace tasks has also increased pressure on Microsoft’s traditional software business. Meanwhile, higher memory chip prices, fuelled by demand for AI data centres, have prompted the company to increase Xbox console prices despite already weak consumer demand.

Microsoft’s gaming division has also come under pressure. Last month, Gaming Division President Asha Sharma told employees the business required a “reset”, saying its operating margin had fallen to 3 per cent and that restructuring, including potential mergers and acquisitions, was being considered.

In a memo published on the company’s website, Sharma said Microsoft had spent more than $20 billion over the past five years on content, platform development and hardware subsidies, excluding the Activision Blizzard King acquisition, while annual revenue had declined by nearly half a billion dollars over the same period.

“Going forward, this cannot continue,” she wrote.

The Information reported last month that Microsoft is also exploring options for its Xbox gaming business, including a possible spinoff or restructuring into a wholly owned subsidiary.