Microsoft gave its employees another heart-wrenching blow on Wednesday, July 2, 2025, announcing its biggest layoff cycle in years with about 9,000 employees being let go—equivalent to close to 4% of its worldwide workforce. The current layoff cycle is the fourth time this year the tech giant has been laying off its employees, bringing the total number of Microsoft employees laid off this year to over 15,000 individuals.
The scale of the latest cuts
The magnitude of such layoffs cannot be exaggerated. With Microsoft having around 228,000 employees globally as of June 2024, the layoff of 9,000 positions is one of the biggest layoffs the company has carried out in recent times. The layoff started Wednesday morning when employees received layoff notices, and impacted employees have until July 8 to sign severance packages, after which they’ll receive 60 paid days off.
This latest batch is part of a trend of increasing layoffs throughout 2025. In January, Microsoft made performance-based reductions in force impacting less than 1% of its employees. In May, the firm made approximately 6,000 cuts (about 3% of employees), and in June, an additional 305 workers were dismissed. Together, the impact has been mind-boggling, with Washington state alone having lost over 3,100 Microsoft jobs in less than two months.
Gaming division suffers most
Microsoft’s gaming division suffered the most, with a number of studios and teams having severe reductions. Microsoft’s Barcelona-based mobile game studio, King division, which owns the Candy Crush franchise, is reducing its workforce by 10%, or roughly 200 staff. ZeniMax European offices also are seeing cutbacks, with reductions to the London-based marketing team and Rockville, Maryland, employees.
Turn 10 Studios, the creators of the Forza Motorsport series, have been most impacted, with more than 70 workers being laid off, touching what one source termed as the “vast majority” of the team. Other game franchises that have been impacted include Raven Software (develops the Call of Duty franchise), Sledgehammer Games, Halo Studios, and several other Xbox-related teams.
In a letter to video game industry employees, Microsoft Gaming head Phil Spencer tried to explain away the terminations by writing: “To position Gaming for long-term success, we will discontinue or reduce work in certain areas of the business and remove management layers to be more agile and effective.” Spencer didn’t take it that far, however, as he referenced the irony that “these changes to occur when we have more players, games, and gaming minutes than ever before.”
Sales and marketing operations impacted
In addition to gaming, Microsoft’s sales and marketing operations have also been impacted hard by the layoffs. To reflect this, Microsoft’s sales arm, which has about 45,000 employees worldwide, has also experienced tremendous pruning as Microsoft streamlines its sales “solutions areas”. The layoffs come at a particularly uncomfortable time given Microsoft’s Chief Commercial Officer and worldwide sales leader Judson Althoff is set to start a two-month sabbatical in July.
The marketing and sales cuts are just one facet of Microsoft’s overall strategy of trimming management levels and simplifying the business. Microsoft is committed to “cutting layers with fewer managers and simplifying processes, products, procedures, and roles to be more efficient,” said a company spokeswoman.
The AI investment paradox
Maybe the most unsettling part of these announcements of layoffs is the timing against Microsoft’s financial results and its investments in AI. Even after recording record revenue of $70 billion and net income of $26 billion for the March quarter, which were far surpassing Wall Street estimates, Microsoft keeps cutting thousands of jobs.
The company has pledged to spend $80 billion in capital expenses for fiscal 2025 on essentially growing AI infrastructure and constructing data centers. This enormous investment on AI seems to be putting pressure on cost reduction in other areas of the company. As D.A. Davidson analyst Gil Luria explained to Investopedia, “for every year Microsoft keeps spending at these levels, the company may be forced to cut its workforce by about 10,000 employees or to go unfilled.”
The correlation between spending on AI and laying off workers came into focus when Microsoft executives made it known that the price of AI infrastructure has squeezed profit margins, with cloud margins to decline in the June quarter from last year. What this translates to is that while Microsoft is investing heavily in the future of AI, it’s doing so by laying off its current employees.
