Microsoft is reportedly cutting around 4,800 jobs, or about 2.1 per cent of its global workforce, as the tech giant pours massive sums into artificial intelligence while also using AI to improve efficiency across its business.
The latest layoffs add to a growing wave of job cuts across Big Tech, with companies under pressure to show returns on record AI spending.
Combined AI investments by major technology firms are expected to cross $700 billion this year. At the same time, companies such as Amazon and Meta have already eliminated thousands of jobs.
Microsoft announced the cuts on Monday after a difficult first half of 2026. Its shares fell nearly 23 per cent during the first six months of the year, marking their worst first-half performance since 2022.
Earlier this year, the company also offered voluntary buyouts to about 7 per cent of its US workforce, or nearly 9,000 employees.
Microsoft has often reduced staff around the end of its fiscal year in June as it finalises spending plans for the next year.
AI Boom, But Costs Are Rising
Strong demand for AI has boosted Microsoft’s Azure cloud business, which had been the exclusive seller of OpenAI models until April.
However, the cost of building massive data centres and computing infrastructure to support AI services is putting pressure on cash flows.
Microsoft is expected to report quarterly results later this month.
In April, the company forecast Azure growth above Wall Street expectations, but also projected around $190 billion in spending for 2026 — far higher than analysts had expected.
AI Also Threatens Traditional Software Business
The irony is that AI is not only creating opportunities for Microsoft but also posing risks to some of its most profitable businesses.
AI tools are increasingly capable of automating routine office and business tasks, raising concerns about the future demand for traditional software products.
Microsoft is also facing pressure in gaming.
A sharp rise in memory chip prices, driven partly by data centre demand, has forced the company to increase Xbox console prices even as demand for the gaming device remains weak.
The latest layoffs underline the new reality of the AI race: even as tech giants spend record amounts on the future, thousands of workers are paying the price today.
