Microsoft Cuts Deep

Key Takeaways

• Microsoft Cuts 9K Jobs: Less than 4% of staff let go, following 6,000+ layoffs in May and 300 in June as FY26 restructuring begins.
• AI Spending Squeeze: $80B AI investment drives cuts in gaming (200 at King) and management layers to control costs.
• Strong Despite Cuts: $26B profit on $70B revenue; stock hits $497.45 with 14% growth expected in June quarter.

Microsoft to Lay Off 9,000 Employees Amid Restructuring

Microsoft (MSFT) announced on Wednesday that it will lay off approximately 9,000 employees, which amounts to less than 4% of its global workforce of 228,000 (as of June 2024). The layoffs span multiple teams, geographies, and experience levels. This round of job cuts coincides with the start of Microsoft’s 2026 fiscal year, a period when the company traditionally reorganizes. 

These layoffs add to previous rounds in 2024, including over 6,000 jobs cut in May, at least 300 in June, and less than 1% trimmed in January. In 2023, the company laid off 10,000 employees, and its largest-ever layoff came in 2014, when 18,000 positions were eliminated after acquiring Nokia’s device business.

Focus on AI, Cost Cuts, and Leaner Management

The layoffs are part of a larger strategy to reduce internal complexity and increase agility by cutting management layers. Microsoft’s gaming division, including its Barcelona-based King unit (maker of Candy Crush), was affected—about 200 roles, or 10% of King’s staff, were cut. Phil Spencer, CEO of Gaming, explained that the changes aim to align the division with long-term strategic goals. 

At a corporate level, Microsoft is also streamlining products, procedures, and roles as it deals with rising costs linked to AI infrastructure investments. The company has committed $80 billion in capital expenditures for fiscal year 2025, but the scale of AI spending is expected to compress cloud service margins in the June quarter.

Strong Financial Performance Amid Industry-Wide Layoffs

Despite rising costs, Microsoft reported impressive financials for the March quarter: $26 billion in net income on $70 billion in revenue, outperforming Wall Street expectations and maintaining its position as one of the most profitable S&P 500 companies. The company also forecasted 14% year-over-year revenue growth in the June quarter, driven by increased demand for Azure cloud services and productivity software. 

Microsoft’s stock hit a record high of $497.45 per share on June 26, though it dipped 0.2% the day the layoffs were announced, while the S&P 500 rose 0.5%. The layoffs reflect a broader trend in Big Tech: Meta plans to trim 5% of its “lowest performers,” Google has laid off hundreds in the past year, and Amazon has cut jobs across multiple divisions. Additionally, ADP reported a surprising 33,000-job loss in the U.S. private sector in June, despite expectations of a 100,000-job increase, pointing to wider economic uncertainty.