microsoft announced a significant workforce reduction this week. The technology giant is letting go of approximately 9,000 employees worldwide. This action impacts less than four percent of the company‘s total global workforce. The cuts will span various teams, geographic locations, and employee experience levels.
Microsoft Restructures Workforce Amidst Fiscal Year Start
The decision to reduce headcount comes at a notable time. It was announced on the second day of Microsoft’s 2026 fiscal year. Executives often unveil organizational changes around this period. This timing aligns with typical corporate restructuring cycles. A spokesperson for the Redmond, Washington-based company confirmed the move in an email statement. “We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace,” the spokesperson said. This statement emphasizes a strategic approach rather than a reaction to immediate financial distress.
Layoffs Continue a Recent Trend
This latest round of layoffs is not an isolated event. Microsoft has conducted several workforce reductions throughout the current calendar year. Earlier in January, the company cut less than one percent of its staff, citing performance reviews as the basis. More substantial cuts followed in May, impacting over 6,000 positions. Another reduction in early June saw at least 300 more jobs eliminated. As of June 2024, Microsoft employed around 228,000 individuals globally. The company also conducted a significant layoff of 10,000 employees in 2023. Looking further back, perhaps the largest previous cut occurred in 2014. That year, Microsoft eliminated 18,000 jobs following its acquisition of Nokia’s devices and services business.
Strategic Goals: Flattening Management Layers
A key driver behind these recent workforce adjustments is a focus on organizational structure. Sources familiar with the internal changes indicate a goal to reduce managerial layers. This strategy aims to decrease the number of management levels between individual contributors and top executives. The objective is to enhance agility and decision-making speed within the company. This echoes similar organizational flattening efforts seen across the tech industry among competitors. By removing redundant supervisory roles, Microsoft intends to streamline operations. The company appears focused on preserving front-line talent and essential leadership positions where possible.
Gaming Division Significantly Impacted
The Gaming division, known primarily through the Xbox brand, is reportedly experiencing some of the steepest reductions in this round. Phil Spencer, CEO of Microsoft Gaming, addressed employees in his division via memo. He confirmed that changes were necessary “To position Gaming for enduring success and allow us to focus on strategic growth areas.” Spencer outlined plans to “end or decrease work in certain areas of the business.” He also stated that the division would follow Microsoft’s broader lead in “removing layers of management to increase agility and effectiveness.” This strategic shift aims to concentrate efforts on the “strongest opportunities.” The goal is to focus on areas with the “greatest potential” while safeguarding thriving segments of the business.
Specific areas within Microsoft Gaming face substantial changes. The King division, famous for the mobile game Candy Crush, is reportedly cutting about 10 percent of its workforce. This translates to around 200 employees affected within that unit. Other units, such as the European-based ZeniMax, have also confirmed job losses. The Turn 10 studio, developers of the popular Forza Motorsport racing series, is laying off over 70 employees. Furthermore, two previously announced game projects have been canceled: Perfect Dark and Everwild. The studio specifically tasked with the Perfect Dark game, The Initiative, is also being closed down as a consequence of these layoffs.
Spencer acknowledged the difficulty of these decisions. He noted that the Gaming division is experiencing significant success, with more players, games, and overall gaming hours than ever before. He also highlighted the strength of their platform, hardware offerings, and future game roadmap. Despite this success, Spencer maintained that these new choices are crucial for continued future success, building on tough decisions made previously. He emphasized that these reductions do not reflect the talent or dedication of the individuals departing.
Financial Performance Remains Robust
The layoffs occur despite Microsoft reporting strong financial results. For the quarter ending in March, the company posted nearly $26 billion in net income. Revenue reached an impressive $70 billion during the same period. These figures significantly exceeded Wall Street’s consensus estimates. This performance solidifies Microsoft’s position as one of the most profitable companies in the S&P 500 index, according to data compiled by FactSet. Company executives projected continued growth. They called for approximately 14 percent year-over-year revenue growth in the subsequent June quarter. This expected expansion is largely driven by strong performance in the Azure cloud services sector and corporate productivity software subscriptions.
Microsoft’s stock price has also reflected this financial strength. The stock closed at a record high of $497.45 per share on June 26. On the day the layoffs were announced, the stock closed down slightly, by 0.2 percent. However, the S&P 500 index saw a gain of 0.5 percent the same day. This indicates that the market reaction to the layoff news was relatively subdued, focusing perhaps more on the company’s overall health and strategic direction.
Broader Context: Tech Industry Trends
Microsoft is not alone in implementing workforce reductions. Several other software providers have also “slimmed down” their operations recently. Companies like Autodesk, Chegg, and CrowdStrike are among those reported to have made job cuts in 2025. These actions across the sector suggest broader pressures or strategic realignments within the technology industry. Earlier on the same day Microsoft’s layoffs were announced, data from payroll processing company ADP showed a decrease in private sector jobs in the U.S. for June. ADP reported that the U.S. private sector lost 33,000 jobs, a figure contrasting sharply with economists polled by Dow Jones, who had predicted an increase of 100,000 jobs. This broader economic data provides additional context, hinting at potential cooling or shifts in the labor market, even for high-performing sectors like tech.
Support for Departing Employees
Microsoft’s Human Resources department is working directly with the affected employees. The company is committed to providing support packages for those impacted by the layoffs. These packages typically include severance pay, continued healthcare coverage for a transition period, and job placement resources. These provisions are being handled in accordance with local labor laws. Impacted employees within Microsoft Gaming are also being encouraged to apply for open positions within the same division. Their applications will receive priority review. Phil Spencer expressed his appreciation for the talent and creativity of the departing staff. He acknowledged that their contributions were essential to the Gaming division’s current success.
Frequently Asked Questions
Why is Microsoft laying off employees despite reporting strong financial performance?
Microsoft executives state the layoffs are part of “organizational changes necessary to best position the company.” This indicates a strategic restructuring effort, not a response to poor financial results. The goal is to reduce management layers and increase agility. This happens even as the company reports strong revenue and profits, especially in cloud services and productivity software, and maintains a high stock value. It’s framed as preparing for future success and adapting to a “dynamic marketplace.”
Which specific Microsoft divisions or projects are most affected by these cuts?
While the layoffs affect various teams globally, the Gaming division (Xbox) is particularly impacted. Specific cuts mentioned include about 10% of the workforce at the King division (~200 employees), reductions at Zenimax, and over 70 layoffs at the Turn 10 studio. Additionally, two game projects, Perfect Dark and Everwild, have been canceled, and The Initiative studio, responsible for Perfect Dark, is being closed.
What kind of support is Microsoft providing to the employees being laid off?
Microsoft is providing affected employees with support packages. These typically include severance pay, continuation of healthcare benefits for a specific duration, and resources to assist with job placement. The company is ensuring these benefits align with local laws. Affected employees within the Gaming division are also being given priority consideration when applying for other open roles within that segment of the company.
Conclusion
Microsoft’s decision to lay off approximately 9,000 employees marks another significant step in its ongoing organizational restructuring. While the company enjoys robust financial health and anticipates continued growth, particularly in key areas like cloud computing, these workforce reductions are framed as necessary strategic adjustments. The focus on flattening management layers underscores a drive for greater agility and effectiveness in a competitive market. The Gaming division is clearly undergoing substantial changes as part of this process, with specific studio cuts and project cancellations. As Microsoft enters its new fiscal year, these layoffs signal a continued effort to optimize its structure for future challenges and opportunities, a trend observed across the wider technology industry. Affected employees are being offered support to help them transition.
