Microsoft Cuts 9,000 Jobs as it Seeks to Reduce Costs

On 2 July 2025, Microsoft declared layoffs affecting 9,000 employees, which constitutes approximately 4% of its global workforce of 228,000.

This marks the largest layoff since October 2023 when 10,000 employees were let go.

These cutbacks occur as Microsoft channels substantial resources towards AI infrastructure while attempting to curtail operational expenses.

Strategic restructuring amid AI investments

The announcement's timing at the beginning of Microsoft's 2026 fiscal year hints at typical executive-initiated changes in organisational structure.

“We continue to implement organisational changes necessary to best position the company and teams for success in a dynamic marketplace,” a Microsoft spokesperson has confirmed.

The dismissals impact various international teams, including those with differing experience levels and are part of a strategy to streamline management layers between individual contributors and senior executives.

Microsoft had pledged US$80bn in capital spending for its fiscal year 2025, with a primary focus on AI infrastructure.

However, the burgeoning costs associated with expanding AI capabilities have pressured the company’s Washington headquarters, expecting lower cloud margins for the June quarter compared to 2024.

Microsoft’s gaming division is particularly affected

Phil Spencer, Microsoft's CEO of Gaming, acknowledged the impact on his division in a memo distributed among employees.

“To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft's lead in removing layers of management to increase agility and effectiveness," he wrote.

The Barcelona-based King division, responsible for Candy Crush, will cut 10% of its workforce, approximately impacting 200 positions.

Though its gaming division will be affected, Microsoft indicated this does not constitute the bulk of the affected workforce.

Pattern of tech sector redundancies

The announcement continues a trend of job reductions within Microsoft throughout 2024 and 2025.

The company decreased its workforce by over 6,000 in May, with at least 300 more in June, alongside earlier performance-based layoffs in January.

Preceding 2023, the significant workforce reduction in 2014 saw 18,000 jobs eliminated after the Nokia acquisition.

Microsoft’s actions mirror broader technology sector trends, as major firms balance AI investments alongside workforce optimisation.

Meta announced trimming around 5% of its “lowest performers”, and Google similarly relinquished hundreds of positions in 2025.

Amazon, too, has cut its workforce across various sectors, including books and devices.

Will AI lead to mass job losses?

Even profitable enterprises face job losses and many experts anticipate that AI could contribute to notable redundancies.

Dario Amodei, CEO of Anthropic, suggests that AI could eliminate half of all entry-level white-collar jobs within the next few years.

“AI could wipe out half of all entry-level white-collar jobs — and spike unemployment to 10-20% in the next one to five years,” he states.

Automation threatens technology, finance, law and consulting sectors significantly.

Organisations advancing AI R&D must also navigate the financial pressures that such innovation demands.

Although AI tools currently assist human tasks like document summarisation, Dario sees rapid progression towards full automation.

“It's going to happen in a small amount of time — as little as a couple of years or less,” he explains.

Can AI work harmoniously alongside employees?

Others maintain an optimistic view. Zahra Bahrololoumi, CEO of Salesforce for the UK & Ireland, envisions AI complementing rather than replacing human work.

“Our whole ethos, our whole philosophy, is about humans and agents driving success together. Our whole reason for being is to improve the productivity of humans, not to replace humans,” she states.

“There’ll be things we want humans to do and there’ll be things we don’t want agents to handle on our behalf.

“The reality is we are going to see new jobs. We are going to see a need for prompt engineers, we’re going to see engineers that can work alongside agents to enhance the quality of their output.”