Microsoft is laying off around 4,800 employees, or about 2.1% of its global workforce, as the company continues to invest heavily in artificial intelligence (AI) while seeking to improve efficiency across its business, according to Reuters.
The latest layoffs come as major technology companies spend billions of dollars on AI infrastructure while facing growing pressure to generate returns on those investments.
Microsoft joins Amazon and Meta Platforms, which have also announced thousands of job cuts this year. Industry estimates suggest Big Tech’s AI investments will exceed $700 billion this year, increasing pressure to manage rising costs while delivering returns.
The company announced the layoffs on Monday after a difficult first half of 2026. Microsoft’s shares have declined nearly 23% during the first six months of the year, marking their weakest first-half performance since 2022.
Earlier this year, Microsoft offered voluntary buyouts to around 9,000 employees in the United States, representing about 7% of its US workforce. The company also routinely reviews its workforce near the end of its financial year in June as it prepares spending plans for the new fiscal year.
Strong demand for artificial intelligence has continued to support growth in Microsoft’s Azure cloud computing business. Azure had been the exclusive seller of OpenAI’s models until April, benefiting from increased adoption of AI services.
However, expanding AI infrastructure requires significant investment in data centres, placing pressure on the company’s cash flows. Microsoft is expected to announce its financial results later this month. In April, it projected Azure sales above Wall Street estimates and forecast spending of $190 billion for 2026.
Microsoft is also facing challenges in its gaming business. Rising memory chip prices driven by AI data centre demand have increased costs, prompting the company to raise Xbox console prices despite weak demand.
Last month, Microsoft’s gaming division head Asha Sharma said the business needed a “reset”. She added that the division’s profit margin had fallen to 3%, making restructuring necessary and indicating that mergers and acquisitions could also be considered.
