Microsoft reportedly plans to lay off under 2.5% of its workforce to reduce costs

Staff across sales, consulting, and Xbox gaming divisions will be impacted by the upcoming layoffs.

Microsoft is reportedly planning to let go of less than 2.5% of its workforce in its latest round of layoffs.

According to a Business Insider report citing people familiar with the matter, the Redmond tech giant plans to lay off fewer than 2.5% of its 220,000-person workforce. It is worth noting that 2.5% may sound like a small number, but in the context of a company as large as Microsoft, that amounts to roughly 5,500 employees. The decision is expected to be announced next week, though some affected employees will be offered new roles. Employees in the sales, consulting, and Xbox gaming divisions are also expected to be impacted.

Microsoft has implemented multiple rounds of layoffs over the past two years. In June 2025, the company announced plans to cut jobs, eliminating thousands of roles across different divisions. Microsoft also laid off 3% of its workforce in May last year. The layoffs have affected Microsoft-owned LinkedIn too, with the social networking platform cutting 5% of its staff this year.

In April this year, Microsoft offered voluntary buyouts to 7% of its U.S. employees whose combined years of service and age equal 70 or more. Business Insider now says about one-third of eligible employees accepted the buyout.

It remains to be seen how many employees in the Xbox gaming division will be affected, but the move is not particularly surprising. Last month, Bloomberg reported that Microsoft was preparing another major round of layoffs in the Xbox division, potentially affecting thousands of employees. Microsoft also eliminated 650 roles from the Xbox division in 2024. Layoffs across the Xbox gaming division became more widely expected after Asha Sharma, the new head of Xbox at Microsoft, called for a “Reset” in her letter to employees.

It seems that layoffs in the tech industry have become the new norm as companies look to reduce costs and fund their AI ambitions. Tech firms have gone all-in on AI and need money to build AI data centers and acquire chips.

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Posted Thursday 2 July 2026 at 8:17 am AEST (my time).

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