Microsoft is laying off around 4,800 employees, or about 2.1% of its global workforce, as the company continues to invest heavily in artificial intelligence (AI) while looking for ways to improve efficiency across its business, reported Reuters.
The latest round of layoffs comes at a time when major technology companies are spending billions of dollars on AI infrastructure and facing growing pressure to show returns on those investments.
Microsoft is not alone in reducing its workforce.
Amazon and Meta Platforms have also announced thousands of job cuts this year as major technology companies face growing pressure to justify their massive spending on artificial intelligence.
According to industry estimates, Big Tech's AI investments are expected to exceed $700 billion this year, increasing the need for companies to generate returns while managing rising costs.
Microsoft announced the layoffs on Monday after a challenging first half of 2026.
The company's shares have fallen nearly 23% during the first six months of the year, making it its weakest first-half performance since 2022.
Earlier this year, the company offered voluntary buyouts to around 9,000 employees in the United States, representing about 7% of its US workforce.
Microsoft also regularly reviews its workforce near the end of its financial year in June as it prepares spending plans for the new fiscal year.
Strong demand for artificial intelligence has continued to drive growth in Microsoft's Azure cloud computing business.
Azure had been the exclusive seller of OpenAI's models until April, helping the company benefit from the growing adoption of AI services.
However, expanding AI infrastructure requires heavy investment in data centres, and those rising costs are putting pressure on Microsoft's cash flows.
The company, which is expected to announce its financial results later this month, had projected Azure sales above Wall Street estimates in April. At the same time, it also forecast spending of $190 billion for 2026, far exceeding market expectations.
Microsoft is also facing challenges in its gaming business.
The growing use of AI tools that can automate routine business tasks has emerged as a potential challenge for its software business. At the same time, rising memory chip prices driven by demand for AI data centres have increased costs.
These higher costs have led Microsoft to raise Xbox console prices at a time when demand for the gaming console was already weak.
Last month, Asha Sharma, the new head of Microsoft's gaming division, said the business needed a "reset". She said the division's profit margin had fallen to 3%, making restructuring necessary and indicating that mergers and acquisitions could also be considered.
In a memo to employees published on Microsoft's website, Sharma said that excluding Activision Blizzard King, the company had invested more than $20 billion over the past five years in content, platforms and hardware subsidies, while annual revenue had declined by nearly half a billion dollars over the same period.
She added that this trend could not continue going forward.
Source: India Today