Microsoft is eliminating 4,800 positions, representing approximately 2.1% of its total workforce.
Company-Wide Layoffs
Microsoft is cutting 4,800 jobs in a fresh round of workforce reductions. The layoffs include a significant reduction in the Xbox division, where 3,200 roles are being cut through fiscal year 2027. Of these Xbox cuts, 1,600 employees are leaving immediately, with an additional 1,600 departures scheduled over the next year. The layoffs affect approximately 20% of Xbox employees.
Xbox CEO Asha Sharma stated that a year-long restructuring creates additional challenges but that it is not possible to make all changes in a single day. She stated the company expects to return to growth in 2027.
"A year-long restructuring creates additional challenges, but it is not possible to make all changes in a single day." — Xbox CEO Asha Sharma
These layoffs follow several previous rounds of workforce reductions at Microsoft, including cuts of approximately 9,000 roles in the summer of 2023 and an estimated 15,000 employees in May and July 2025.
Voluntary Buyout Program
In a separate initiative announced in a memo on May 1, 2025, Microsoft is offering a one-time voluntary retirement buyout program to eligible US employees. This marks the first time in the company's 51-year history that such a program has been offered.
Eligibility Criteria:
- Employees at the senior director level and below
- Employees whose years of service at Microsoft plus their age total 70 or more (with some exceptions)
- Employees with sales incentive plans are not eligible to participate
Scope:
- Approximately 7% of Microsoft's US workforce is eligible, affecting an estimated 8,750 employees
- As of June 2025, Microsoft had approximately 228,000 employees globally, with 125,000 in the United States
- Eligible employees and their managers will receive details on May 7, 2025
"Our hope is that this program gives those eligible the choice to take that next step on their own terms, with generous company support." — Amy Coleman, Executive Vice President and Chief People Officer
Compensation and Review Changes
Alongside the workforce adjustments, Microsoft is modifying its stock compensation structure for annual rewards. Managers will no longer be required to tie stock directly to cash bonuses. According to Coleman, this change provides "more flexibility to meaningfully recognize high performance." The company is also simplifying its review process, reducing pay options for managers from nine to five.
Industry Context
Microsoft has increased capital spending on data centers to supply cloud clients with computing power for generative AI models. The company reported $37.5 billion in capital expenditures during the second quarter of fiscal year 2026, largely for data center construction. Competitors such as Alphabet and Amazon are also increasing spending on data centers.
As of the date of reporting, Microsoft shares had declined 19% in 2026, underperforming other large-cap technology stocks. The company has reported growth in cloud services and LinkedIn, but revenue has declined in Windows licenses, Surface devices, and Xbox gaming.