Microsoft is preparing to cut thousands of jobs as early as next week, according to a Business Insider report, in another sign that Big Tech’s AI spending boom is coming with a human cost. The cuts are expected to affect less than 2.5% of Microsoft’s roughly 228,000 full-time employees.
Xbox layoffs had already been widely anticipated after months of pressure on the gaming business, including console price hikes and marketing cuts. More tellingly, sales and consulting roles are also reportedly in scope, marking this as more than just an Xbox restructuring. It fits a broader 2026 pattern as tech giants trim traditional headcount while pouring record sums into AI infrastructure.
The reported reductions would be smaller than Microsoft’s big layoff round in July 2025, when the company cut nearly 4% of its workforce. The timing aligns with the company’s fiscal year end on June 30, a period often used for budget and team reviews. Microsoft has not officially confirmed the new layoffs.
Sales and consulting teams are now under scrutiny, which signals that Microsoft may be rethinking how many people it needs to sell and support software in an AI-heavy enterprise market. Challenger, Gray & Christmas data shows AI has been cited in 87,714 job cuts so far in 2026, already surpassing the full-year 2025 total.
Microsoft is not alone: Meta has cut about 10% of its workforce, Amazon confirmed 16,000 corporate job losses in January, and Oracle’s headcount fell by about 21,000 employees in fiscal 2026 during its AI and cloud restructuring.
However, not everyone accepts the AI explanation at face value. Nvidia CEO Jensen Huang called blaming layoffs on AI “lazy,” arguing most companies haven’t deployed AI at enough scale to justify sweeping cuts. Gartner Vice President Analyst Helen Poitevin noted a survey showing no clear link between deeper staff cuts and better financial returns from AI tools. Cognizant Chief AI Officer Babak Hodjat suggested AI is sometimes used as a scapegoat for earlier overhiring, while OpenAI CEO Sam Altman calls the practice “AI washing.”
