Microsoft Layoffs 2026: New Cuts to Hit Sales, Consulting, and Xbox

What Business Insider is reporting

Microsoft is planning to cut under 2.5 percent of its workforce in a new round of layoffs that could be announced as early as next week, according to a Business Insider report cited by Reuters on June 30. The cuts are expected to affect thousands of roles, including positions in sales and consulting, as well as jobs inside the Xbox gaming division.

Microsoft has not confirmed the report and did not respond to a request for comment outside regular business hours, according to Reuters. If the timeline holds, the announcement would land just days into Microsoft's new fiscal year, which began July 1.

Xbox was already bracing for its own reset

The Xbox cuts described in the Business Insider report land on top of a separate, larger restructuring that new Xbox CEO Asha Sharma has been signaling since June. In a memo to staff, Sharma and Xbox chief content officer Matt Booty said the division would close the fiscal year at roughly a 3 percent internal profit metric Microsoft calls its accountability margin, down year over year.

Sharma and Booty told employees that, excluding the Activision Blizzard King acquisition, Xbox had spent more than 20 billion dollars over five years on content, platform, and hardware subsidies while annual revenue declined by close to half a billion dollars over the same period. Bloomberg has reported that the resulting layoffs, timed to Microsoft's fiscal year close, would be significant and paired with sharp cuts to marketing and other budgets. The exact scale has not been made public.

Sharma took over Xbox in February after longtime leader Phil Spencer's retirement, having previously run Microsoft's CoreAI product organization. Her framing of the reset centers on console hardware costs that have climbed sharply, an Xbox platform she has described as overly complex and dependent on outside vendors, and a studio system built for a content strategy the division can no longer afford to fully fund.

A fiscal year already defined by workforce moves

This is not Microsoft's first workforce action of the year. In April, the company introduced its first-ever voluntary retirement program, nicknamed the Rule of 70 internally, open to US employees at senior director level and below whose combined age and years of service add up to 70 or more. Roughly 8,750 employees, about 7 percent of Microsoft's 125,000-person US workforce, qualified. Eligible staff had a 30-day window to accept a package that included up to nine months of base pay, extended healthcare coverage, and accelerated stock vesting.

Notably, Microsoft's AI and Copilot teams were exempted from a March hiring freeze and were not pushed toward the buyout. Engineers working on Azure OpenAI Service, GitHub Copilot, and the company's Turing research group were explicitly carved out, underscoring where Microsoft continues to direct headcount investment even as it trims elsewhere in enterprise infrastructure, operations, and sales.

The US angle: cutting headcount while AI spending climbs

Microsoft's new round fits a pattern that has defined the 2026 tech labor market: companies posting strong financial results while continuing to reduce headcount to fund AI infrastructure. Tech layoffs topped 150,000 in the first half of 2026, with Q1 alone accounting for about 81,700 cuts, the highest quarterly total since early 2023. Goldman Sachs has estimated that AI-attributed payroll reductions across major US employers are now running at more than 16,000 a month.

For US operators and enterprise teams, the pattern is becoming familiar. Meta, Amazon, Oracle, Cisco, Salesforce, and Intuit have all announced significant 2026 reductions alongside record or growing AI capital expenditure. Four hyperscalers, including Microsoft, have committed to a combined 700 billion dollars in 2026 capital spending, nearly double what they spent in 2025. Microsoft itself has reported an AI business running at a 37 billion dollar annual revenue rate, up 123 percent year over year, alongside 40 percent growth in Azure cloud revenue, even as it continues to cut roles in less AI-exposed parts of the business.

What to watch next

• Official confirmation of scale and timing, expected as early as next week if the Business Insider report holds.
• Whether Xbox layoffs are announced as part of this round or separately, as Sharma's reset has previously been described as its own process tied to the June 30 fiscal year close.
• Which sales and consulting functions are affected, and whether AI, Copilot, and Azure OpenAI teams remain exempt as they were during the April voluntary retirement program.
• Any WARN Act filings in states where Microsoft has large operations, which typically follow within days of a confirmed reduction.

Sources