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 2,28,000 full-time employees.
Xbox layoffs had already been widely expected after months of pressure on the gaming business. The more telling detail is that sales and consulting roles are also reportedly in scope.
That makes this bigger than another Xbox restructuring.
It fits a broader 2026 pattern as tech giants are trimming traditional headcount while pouring record sums into AI infrastructure.
Microsoft has not officially confirmed the new layoffs.
Microsoft layoffs: What we know so far
The reported cuts would be smaller than Microsoft’s big layoff round last year, when the company eliminated roughly 4% of its workforce.
The timing also fits a familiar corporate pattern as Microsoft’s fiscal year ends on June 30, and the company often uses that period to review budgets, teams and priorities for the year ahead.
Still, the areas reportedly affected are important.
Xbox has already been under pressure after console price hikes, marketing cuts and questions over the future shape of Microsoft’s gaming division.
Microsoft recently said it would raise Xbox console prices globally from August, blaming a worsening components shortage, especially in storage and memory.
Reports from Bloomberg and The Information have also said Microsoft has been weighing deeper changes to Xbox, including restructuring options and possible studio changes.
Sales and consulting become the new target
Sales and consulting teams are not usually the first place investors look when they hear “AI layoffs”.
These are customer-facing roles and help win contracts, manage relationships and support implementation.
Cutting them suggests Microsoft is not only automating back-office work or trimming underperforming products.
It may also be rethinking how many people it needs to sell and support software in an AI-heavy enterprise market.
Challenger, Gray & Christmas said AI had been cited in 87,714 job cuts so far in 2026 by the end of May, already more than the total attributed to AI in all of 2025.
Tech-sector cuts have also climbed sharply this year.
Microsoft is not alone as Meta began layoffs affecting about 10% of its workforce this year.
Amazon confirmed 16,000 corporate job cuts in January, completing a broader plan for about 30,000 reductions since October.
Oracle’s workforce fell by about 21,000 employees in fiscal 2026 as it restructured around AI and cloud infrastructure.
Not everyone is buying the AI explanation
The problem is that “AI made us do it” has become too easy an explanation.
Nvidia CEO Jensen Huang has pushed back on executives who blame layoffs on AI, calling that narrative “lazy”.
His argument is that most companies have not deployed AI at enough scale to justify sweeping workforce reductions.
Gartner has made a similar point. Helen Poitevin, a Gartner vice president analyst, said workforce reductions may create budget room, but they do not create returns.
Gartner’s May survey of 350 executives found that companies cutting more staff were not clearly getting better financial results from autonomous technologies than those cutting less.
Cognizant Chief AI Officer Babak Hodjat has also argued that AI is sometimes used as a scapegoat for earlier overhiring and weak cost discipline.
OpenAI CEO Sam Altman has called this “AI washing,” a term used for companies blaming AI for decisions they may have made anyway.
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