Microsoft is laying off approximately 4,800 employees, representing about 2.1% of its global workforce, as the company continues to invest heavily in artificial intelligence (AI) while seeking to improve operational efficiency, according to a Reuters report.
The latest round of job cuts comes as major technology companies spend billions of dollars on AI infrastructure while facing increasing pressure from investors to generate returns on those investments.
Microsoft's decision reflects a broader trend across the technology sector.
Companies such as Amazon and Meta Platforms have also announced significant workforce reductions this year as they balance rising AI-related expenditure with the need to control costs and improve profitability.
Industry estimates suggest that the combined AI investments of major technology firms are expected to exceed $700 billion this year, increasing the focus on delivering financial returns from those investments.
The layoffs were announced on Monday following a difficult first half of 2026 for Microsoft.
The company's shares have declined by nearly 23% during the first six months of the year, marking their weakest first-half performance since 2022.
Earlier this year, Microsoft also offered voluntary buyouts to around 9,000 employees in the United States, accounting for roughly 7% of its US workforce.
The company routinely evaluates its workforce at the end of its financial year in June as part of its planning process for the new fiscal year.
Strong demand for artificial intelligence has continued to support growth in Microsoft's Azure cloud computing business.
Until April, Azure served as the exclusive cloud provider for OpenAI's models, allowing Microsoft to benefit from the rapid adoption of AI-powered services.
However, expanding AI capabilities has required substantial investment in data centres and related infrastructure, significantly increasing capital expenditure and placing pressure on the company's cash flow.
Microsoft, which is expected to announce its financial results later this month, had projected Azure revenue above Wall Street expectations in April. At the same time, it forecast capital expenditure of $190 billion for 2026, substantially exceeding market estimates.
The company is also facing challenges within its gaming business.
The increasing adoption of AI tools capable of automating routine tasks has created additional pressure on parts of Microsoft's software business. Meanwhile, rising memory chip prices driven by demand for AI data centres have further increased operating costs.
These cost pressures have prompted Microsoft to increase Xbox console prices despite already weak demand for the gaming platform.
Last month, Asha Sharma, the newly appointed head of Microsoft's gaming division, said the business required a "reset." She noted that the division's profit margin had declined to 3%, making restructuring necessary and suggesting that mergers and acquisitions could also be explored.
In a memo to employees published on Microsoft's website, Sharma said that, excluding Activision Blizzard King, Microsoft had invested more than $20 billion over the past five years in gaming content, platforms and hardware subsidies, while annual revenue had declined by nearly half a billion dollars during the same period.
She added that such a trend was unsustainable and could not continue in the future.
