Microsoft has announced plans to cut about 4,800 jobs, representing approximately 2.1% of its global workforce, as the technology giant restructures parts of its commercial and Xbox businesses while increasing investment in artificial intelligence infrastructure.
The layoffs come as major technology companies continue to streamline operations to fund the growing cost of AI development and data centre expansion.
In a memo to employees, Microsoft’s Chief People Officer, Amy Coleman, said the restructuring is intended to better align the company’s resources and operating structure with its strategic priorities.
Coleman noted that while artificial intelligence is changing how work is performed by automating some routine tasks, the affected positions are not being replaced by AI.
“I also want to be direct that the roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done,” she said.
The announcement follows a difficult first half of 2026 for Microsoft, with the company’s shares declining nearly 23%, their weakest first-half performance since 2022.
Earlier this year, Microsoft also offered voluntary retirement buyouts to about 9,000 employees, representing roughly 7% of its U.S. workforce, as part of broader cost management efforts.
The company is among several major technology firms reducing headcount while ramping up AI spending. Amazon and Meta have also announced thousands of job cuts this year as they redirect resources toward AI infrastructure.
Analysts say the move reflects Microsoft’s effort to balance heavy AI investment with profitability.
Gil Luria, Managing Director at D.A. Davidson, said Microsoft has been managing its workforce to help finance its AI ambitions while maintaining profit margins.
The restructuring comes as demand for Microsoft’s Azure cloud platform continues to grow, driven by AI services. However, the company is also facing rising costs associated with building data centres and expanding computing infrastructure to support those services.
Microsoft earlier projected capital spending of $190 billion for 2026, significantly above market expectations, underscoring the scale of its investment in AI infrastructure.
The company is expected to release its latest financial results later this month.
