Microsoft has initiated a significant restructuring effort, which includes reducing its workforce by approximately 9,000 positions. This move, representing nearly 4% of its global workforce, is the company's second major layoff round in 2025, and its largest in over two years. The layoffs will impact multiple teams, geographies, and levels of seniority across the company.

The primary driver behind this restructuring is Microsoft's strategic pivot towards artificial intelligence (AI) and cloud infrastructure. The company plans to invest an estimated $80 billion in AI-related development in fiscal year 2025 alone. This substantial investment necessitates a reallocation of resources, leading to workforce reductions in other areas. Microsoft aims to streamline operations, reduce management layers, and increase agility to better compete in a dynamic marketplace.

Several divisions within Microsoft are affected by the layoffs. The gaming division, including Xbox, is significantly impacted. Microsoft is reportedly cancelling development of the Perfect Dark reboot and Everwild, and shutting down The Initiative, the studio behind Perfect Dark. Staff at other game studios, including Turn 10 and ZeniMax Online Studios, have also been affected. The cuts also extend to other departments, including sales, legal, engineering and product roles, as well as the teams behind mobile game titles like Candy Crush.

Microsoft's CEO, Satya Nadella, has emphasized the company's commitment to AI and its potential to automate tasks previously performed by entire teams of engineers. He stated that AI writes up to 30% of the company's code. This increasing reliance on AI-driven tools is reshaping roles and contributing to the need for a leaner workforce.

The layoffs are part of a broader trend in the tech industry, with companies like Intel, Google, Amazon, Autodesk, Chegg and CrowdStrike also reducing their workforces. According to the outplacement firm Challenger, Gray & Christmas, technology companies have announced 76,214 job cuts this year, up 27% from the same period last year. These cuts are driven by factors such as slowing growth, rising operational costs, visa uncertainties and the need to shift resources towards AI and automation.

Microsoft's restructuring also involves reducing its physical footprint in certain regions. The company has closed its office in Pakistan and reduced its presence in Russia. In China, Microsoft shut down its IoT & AI Insider Lab in Shanghai and ended its outsourcing arrangement with Wicresoft.

Despite the layoffs, Microsoft remains highly profitable. The company posted $26 billion in profit on $70 billion in revenue for the March quarter and projects continued growth through Azure cloud and AI services. Microsoft's stock performance remains strong, fueled by investor optimism about the company's AI initiatives.

Microsoft's decision to restructure and reduce its workforce reflects a strategic shift towards AI and cloud computing. While the layoffs have a significant impact on affected employees, the company believes these changes are necessary to enhance efficiency, agility, and competitiveness in the long term. The company is offering severance packages, career transition support, and internal opportunities where possible.