Microsoft Plans Second Round of Layoffs Amid $80 Billion AI Push

Microsoft’s massive AI investment drives workforce cuts across gaming and sales divisions despite record revenue growth

Key Takeaways

• Second round of 2025 layoffs imminent as Microsoft prepares to cut thousands more jobs this week, following 6,300 layoffs already completed this year
• $80 billion AI investment drives cost pressures with Microsoft’s unprecedented spending on AI infrastructure forcing workforce reductions to maintain profit margins
• Sales and gaming divisions face cuts despite gaming’s $21.5 billion revenue in fiscal 2024, signaling broad restructuring across previously protected departments

Introduction

Microsoft prepares to announce its second major round of layoffs in 2025 this week, as the tech giant grapples with mounting costs from its aggressive artificial intelligence expansion. The company has already eliminated 6,300 positions this year, representing approximately 3% of its global workforce.

The upcoming cuts reflect the financial strain of Microsoft’s record $80 billion AI infrastructure investment in fiscal 2025. This marks one of the largest single-year AI commitments in the technology sector, focusing primarily on data center expansion to support cloud and AI services.

Key Developments

The layoffs target multiple divisions across Microsoft’s operations, with sales and marketing departments expected to bear significant impact. Previously protected areas, including the gaming division, now face potential reductions despite strong revenue performance.

Microsoft’s gaming unit generated $21.5 billion in fiscal 2024 revenue, bolstered by the Activision Blizzard acquisition. However, even this successful division cannot escape the company’s broader cost-cutting initiatives.

Chief Commercial Officer Judson Althoff will take an eight-week sabbatical concluding in September, aligning with the company’s restructuring timeline. Microsoft declined to specify the exact scope of the upcoming workforce reductions.

Market Impact

Microsoft reported robust Q3 2025 earnings with revenue exceeding $70 billion, marking 13% year-over-year growth. However, the company faces mounting depreciation costs and margin pressure from unprecedented capital expenditures on AI infrastructure.

The tech industry has experienced over 90,000 layoffs globally in 2025, with US-based companies accounting for 72.5% of total reductions. Microsoft’s actions mirror broader industry trends as companies balance innovation investments with operational efficiency.

Gaming revenue of $21.5 billion demonstrates strength in software services, offsetting declines in hardware sales. This performance highlights the complex financial landscape driving Microsoft’s strategic decisions.

Strategic Insights

Microsoft’s workforce reduction strategy centers on streamlining operations while maintaining AI investment levels. The company previously announced plans to shift sales responsibility for small and mid-size business software to third-party partners, reducing direct staffing needs.

AI automation plays an increasingly central role in Microsoft’s operations, with 30% of internal code now generated by artificial intelligence. The company targets expanding this to 95% by 2030, potentially reducing demand for traditional software development roles.

The restructuring affects customer-facing roles significantly, particularly in sales departments that were initially spared in earlier rounds. This shift reflects Microsoft’s evolving go-to-market strategy and reliance on partner channels.

Expert Opinions and Data

Industry analysts suggest Microsoft may need to continue reducing headcount by thousands annually to sustain current AI investment levels while maintaining profit margins. Bloomberg reports these cuts underscore financial pressures facing big tech companies investing heavily in AI development.

Labor advocates express growing concern about AI-driven job displacement, particularly given the pace and scale of workforce reductions across the technology sector. Microsoft employed 228,000 people globally at the end of June 2024, including 45,000 in sales and marketing roles.

Political leaders discuss legislative measures to support affected workers, including retraining programs and enhanced unemployment benefits for transitioning to AI-driven economy roles. The social responsibility debate intensifies as tech giants post record profits while reducing workforce levels.

Conclusion

Microsoft’s impending layoffs represent a strategic reset driven by the financial realities of massive AI infrastructure investments. The company balances technological advancement with operational efficiency, affecting previously protected divisions including gaming and sales.

The workforce reductions signal broader industry transformation as companies automate traditional roles while investing in next-generation technologies. Microsoft’s approach reflects the challenging dynamics facing tech giants navigating innovation costs and competitive pressures in the AI era.