Microsoft on Monday cut about 4,800 positions, or 2.1% of its global workforce. This is the latest in a series of layoffs that have fueled concerns that AI will replace corporate talent.
According to a memo shared with Microsoft staff, the layoffs will hit Xbox and commercial sales the hardest.
Below is an excerpt from a memo attributed to Amy Coleman, EVP and Chief Human Resources Officer.
“Our businesses are changing because the world around them is changing. The way we build, deploy, and use technology is changing faster than at any point in my time here. Customer needs are changing, and the business models that serve them are changing. That means the work itself has to change: what we do, where we focus, and how we organize.”
Companies cannot choose whether or not their industry changes. They just have to choose whether or not to be changed by it. That means aligning resources and roles and changing the way we operate so we can have the greatest impact for our customers. ”
Coleman stressed that currently eliminated roles “are not going to be replaced by AI,” but noted that “the truth is that AI is changing the way we do work.”
“Some of the tasks we do every day can now be automated, which means we all need to keep learning, keep building new skills, and keep adapting as work evolves,” Coleman wrote.
For many people feeling the pain of unemployment, it’s the difference that makes no difference.
The job cuts will be based on Microsoft’s recently launched Frontier Companies business unit. This business unit is focused on delivering enterprise AI deployments using the company’s existing AI tools and army of forward-deployed engineers. The move is backed by a $2.5 billion investment and reflects a common theme seen in this year’s layoffs: layoffs correlate with increased AI spending.
Coleman had little to say about Xbox’s job cuts, saying, “We are realigning our business for long-term success. Engineering teams across the company will also evolve their structure and priorities to meet customer needs and innovate for the future.”
As part of the transition, Microsoft will transition its four game studios to operate under new management, ensuring protection of intellectual property and ongoing projects, Coleman wrote.
Xbox’s layoffs come as the gaming industry shrinks amid new generative AI opportunities. Companies that build world models, including Google DeepMind, World Labs, General Intuition, Luma AI, and Runway, have received millions of dollars in funding over the past year and garnered a lot of publicity for their playable world model demos. All of these companies see gaming as a short-term opportunity for commercialization.
In April, Microsoft offered a buyout of an undisclosed number of employees (some estimates put the number at about 5,500) in the form of voluntary redundancies, with the goal of building a high-performing team. Last year, Microsoft laid off about 15,000 employees in two rounds.
The layoffs are part of a series of layoffs in the tech industry, with nearly 154,000 jobs lost in the first half of 2026 alone, with Big Tech companies including Meta, Oracle, Amazon and Cognizant cutting thousands of employees.
In addition to Monday’s cuts, Microsoft said it is working on ways to keep employees employed, including reskilling them and placing them in new roles.
“Over the past year, we have redeployed more than 4,000 employees to new roles, including 500 more this month,” Coleman said.
Microsoft did not immediately respond to requests for comment or further information.
If you buy through links in our articles, we may earn a small commission. This does not affect editorial independence.
