Microsoft to cut about 4,800 jobs, or 2.1% of its workforce, as it restructures for AI-led change

Microsoft said it will reduce its workforce by about 4,800 roles, representing about 2.1% of its global headcount, as the company restructures to align investment with its biggest growth priorities. The news sparked selling in the stock, with reports describing pressure on shares immediately after the announcement.

In messages to employees cited by other outlets, Microsoft’s chief people officer, Amy Coleman, said technology is transforming faster than in her time at the company and that some everyday tasks can be automated. Coleman emphasized that AI would not replace the specific workers who are being laid off, but that employees still need to keep building new skills as the nature of work evolves.

Reporting on the internal communications also indicated that the job cuts are concentrated in the Xbox organization. Xbox CEO Asha Sharma told division employees that the company plans to cut 3,200 people through fiscal 2027, described as roughly two-thirds of the companywide layoffs and about 20% of employees working in Xbox, according to the report.

The same reporting said 1,600 of the Xbox-related roles would be eliminated immediately, with the remaining reductions continuing through the rest of fiscal 2027. Sharma reportedly acknowledged the disruption of a year-long restructuring and framed it as changes that cannot be completed in a single day.

The overall framing was that AI will change how work is designed, deployed, and used, affecting where Microsoft needs people and how it organizes work. Coleman’s comments suggested the company views the transition as a learning and adaptation challenge rather than a simple, one-time automation event, and she linked that transition to what customers are experiencing.

While the layoffs are being described as part of Microsoft’s broader shift, the company has not, in the publicly cited accounts, offered detailed breakdowns of which functions, geographies, or job families will be most affected beyond the Xbox focus. It also has not, in the reports referenced, provided specific cost-savings targets, severance terms, or the expected timing of any related hiring or reorganization beyond the timeline for Xbox cuts.

Microsoft’s move fits a wider pattern in technology, where companies are rebalancing talent and spending as generative AI tools change internal workflows and customer offerings. For Microsoft, the message underscores that its biggest investment themes, including AI-enabled productivity and cloud services, are increasingly intertwined with internal operating models and staffing decisions.