Microsoft cuts 4,800 jobs as new financial year starts

Microsoft began its new financial year by eliminating approximately 4,800 positions on July 6, 2026, representing about 2.1 percent of its total workforce. The majority of those affected work in the company’s Xbox division or its commercial sales organization.

In a company-wide note, executive vice president and chief people officer Amy Coleman attributed the reductions to rapid shifts across the technology sector. She cited the “need to adjust resources and roles and shift how we operate” in response to artificial intelligence’s growing influence on businesses. Coleman added, “I also want to be direct that the roles eliminated today are not being replaced by AI.” She noted that AI is nonetheless altering workflows inside the company.

The cuts will remove around 1,600 jobs from Xbox immediately, with the goal of reducing the division’s headcount by roughly 20 percent by the close of the fiscal year. As part of its effort to reset the gaming business after years of underperformance, Microsoft is divesting four studios and considering the sale of one more. Further details on the affected studios appear in a related report.

Coleman acknowledged the difficulty of the moves, stating the company is focused on redeploying staff where possible. Over the past year Microsoft has moved more than 4,000 employees into new positions, including 500 in the last month alone.

Before resorting to involuntary reductions, the company offered a voluntary retirement package to U.S. employees whose combined age and years of service totaled 70 or higher. The package provided five years of continued healthcare coverage, a lump-sum severance payment, and six months of accelerated stock vesting. Coleman reported that more than 30 percent of those eligible accepted the offer.

The latest reductions follow a previous round in which Microsoft eliminated around 9,100 positions one year earlier.