Microsoft has confirmed it will lay off as many as 9,000 employees as part of its ongoing restructuring, marking its fourth round of job cuts this year, BBC reports.
The move comes as the tech giant ramps up its investment in artificial intelligence (AI), including a planned $80 billion spend on data centers to support AI development.
A Microsoft spokesperson said the layoffs are part of “organizational changes necessary to best position the company for success in a dynamic marketplace.” The cuts will impact approximately 4% of Microsoft’s global workforce of 228,000 people. The company did not specify which divisions would be most affected, but multiple reports suggest the gaming sector — particularly the Xbox division — is facing significant reductions.
According to internal communications seen by media outlets The Verge and IGN, Microsoft is canceling development on two anticipated video game projects: a reboot of the Perfect Dark franchise and the fantasy adventure title Everwild. As part of that decision, The Initiative — a Microsoft-owned studio leading the Perfect Dark reboot — is expected to shut down.
The layoffs have also reportedly reached other Microsoft gaming studios, including Forza Motorsport developer Turn 10 and Elder Scrolls Online studio ZeniMax Online. ZeniMax’s studio director, Matt Firor, announced he would step down in July after more than 18 years with the company.
Elsewhere in the industry, the ripple effects of Microsoft’s strategic shift have extended to external studios. Romero Games, an independent developer co-founded by Doom creator John Romero, announced layoffs after its game funding was withdrawn by a publisher.
“Our game and our studio were also affected,” Romero said in a post on X.
The latest round of layoffs follows previous Microsoft workforce reductions in 2025, including a cut of 6,000 positions in May. A database maintained by the state of Washington shows that more than 800 of the roles eliminated are located in Microsoft’s Redmond and Bellevue campuses, key hubs for the company.
Microsoft, like other major tech firms, has been shifting focus to AI as a central pillar of its long-term strategy. The company recently brought on Mustafa Suleyman, a co-founder of DeepMind, to lead its AI division, signaling a deeper commitment to the technology.
A top Microsoft executive recently told the BBC that artificial intelligence will “fundamentally define” the next 50 years, changing how people work and interact. Microsoft is a major investor in OpenAI, the company behind ChatGPT, and its AI assistant Copilot is being integrated into Microsoft’s core productivity products. However, reports indicate that uptake among enterprise customers has been slower than expected, with some preferring the standalone ChatGPT tool.
Meanwhile, Microsoft’s competitors are also aggressively competing for AI talent. Meta, which owns Facebook and Instagram, has reportedly offered multimillion-dollar packages to attract top AI researchers, with CEO Mark Zuckerberg personally involved in recruitment efforts. OpenAI CEO Sam Altman recently said that some of his staff received signing bonus offers exceeding $100 million.
Amazon, too, is undergoing its own transition. CEO Andy Jassy recently indicated that AI would eventually replace some roles at the company as it restructures around automation.
