Rumours suggest Microsoft may cut up to 22,000 jobs in early 2026

In 2025, Microsoft made 15,000 tough job cuts, now it appears that Microsoft is preparing for another significant round of layoffs in the first quarter. The Redmond giant has historically targeted layoffs for January and July, marking the post-holiday period and fiscal year start respectively.

Satya Nadella has noted that 2026 could be a messy year as the industry moves past demos to actually integrating AI more deeply. Microsoft, for example, is reallocating capital expenditure toward GPUs and data centres. To cover this, it needs to make savings on human capital, in English, it is going to fire people.

Nadella has also called Microsoft’s size a “massive disadvantage” in the AI race at over 220,000 employees. It has already begun cutting out middle management to try and flatten the organization after overhiring during the pandemic.

According to the HR Digest, rumours suggest that the reduction could see 5 to 10 per cent of jobs cut across Microsoft’s global workforce, that’s between 11,000 and 22,000 jobs. The most at-risk jobs in the company are middle management, Azure Cloud Operations, gaming/Xbox, sales, and non-core engineering.

Obviously, Microsoft has not announced any cuts yet, these are just rumours and hopefully won’t be necessary. The US unemployment rate has been on the rise since June 2025, meaning people looking for work are having a harder time finding a job because there are fewer available roles. It’ll definitely be interesting to see how fast new AI-oriented jobs pop-up after killing off so many jobs.

What is your opinion? Will AI create new jobs quickly enough to make up for the job losses? Leave a comment.

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Posted Thursday 8 January 2026 at 4:57 am AEST (my time).

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