Microsoft
Microsoft's Xbox division faces its biggest single workforce cut in 25 years as new chief Asha Sharma resets the business Simon Ray/Unsplash

Microsoft is preparing to lay off thousands of employees as early as next week, just days after its fiscal year concluded on 30 June midnight. The upcoming restructuring is expected to affect under 2.5% of the tech giant's 228,000-person global workforce. Internal sources indicate that the workforce reductions will primarily target positions within the company's sales, consulting, and Xbox divisions.

For US contractors already tied to Xbox projects, the layoffs have started before official internal cuts have landed.

Xbox's main public relations agency, Assembly Media, laid off staff on 30 June, including workers on its Xbox account. Bloomberg's Jason Schreier initially tied the cuts to Microsoft ending vendor contracts, then clarified they were part of an agency-wide reorganisation. Either way, staff who never held a Microsoft badge lost their livelihoods on the same day the fiscal year closed.

Thousands Face the Axe Across Three Divisions

A full 2.5% cut would translate to more than 5,000 roles. Microsoft's annual Securities and Exchange Commission filing from June 2024 listed 228,000 full-time staff. Internal reports confirm the reductions will span the sales organisation, the consulting arm, and Xbox. Microsoft has not commented publicly, declining requests for confirmation as the fiscal year closed.

The silence has US workers refreshing internal channels. In July 2025, Microsoft cut nearly 4% of its workforce, one of its largest layoffs ever. This year's percentage looks smaller in part because about a third of roughly 8,750 eligible US employees took a buyout offer.

Xbox Contractors Are Already Getting the Call

The Xbox division is bracing for what could be the largest single workforce reduction in its 25-year history. New Xbox chief executive Asha Sharma, who took the seat in February from Phil Spencer, told employees on 10 June that the business is 'not in a healthy spot' and needs a reset.

In a memo posted publicly on Xbox Wire, Sharma and Chief Content Officer Matt Booty disclosed that Xbox spent more than $20 billion (£15.1 billion) on content, platforms, and hardware subsidies over five years, excluding Activision Blizzard King. Annual revenue over the same stretch fell by nearly $500 million (£378 million). Xbox's fiscal 2026 accountability margin sits at about 3%.

Studios reportedly on the negotiating table include Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs. Craig Duncan, head of Xbox Game Studios, resigned last week.

Why This Round Is Different From July 2025

Microsoft's AI spending is the pressure point. The company is on pace to invest more than $100 billion (£76 billion) in AI and cloud infrastructure this fiscal year, up from $88.7 billion (£67 billion), with about two-thirds funding chips that power AI. Microsoft shares closed at $373.02 (£282) on 30 June, down 19% over the past month and near a 52-week low.

Wall Street wants proof the AI capital expenditure will pay back. Cutting sales and consulting is the fastest lever Microsoft has to protect margins while it keeps pouring cash into data centres.

What US Workers Can Do Now

US tech employers have announced 123,653 job cuts so far in 2026, up 66% from the same period last year, according to Challenger, Gray and Christmas. AI has been the most-cited layoff reason three months running, with 38,579 May cuts tied directly to the technology.

Microsoft sales and consulting staff can review internal severance benchmarks, update LinkedIn profiles, and confirm which projects sit inside fiscal 2027 budgets. Vendor and agency workers with Xbox exposure should treat this week as the trigger, not the warning.

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