Microsoft Layoffs: What's Behind The Job Cuts in Xbox, Sales Teams?

Microsoft is preparing for another round of layoffs, with “major” and “substantial” job cuts expected to affect its Xbox and global sales divisions in early July 2025, reported Bloomberg. This move, part of a broader company-wide realignment, follows the elimination of over 6,000 roles in just the past two months.

Microsoft stock remained largely unfazed following the news, closing a percent higher at $497.49, as per INDmoney data. This blog unpacks the latest developments in Microsoft's workforce strategy, reviews its recent layoff history, explores the company’s increasing focus on AI, and assesses how it shows a trend across the tech industry.

Microsoft Layoffs 2025: What’s behind the Xbox, Sales Team Cuts

According to Bloomberg, Microsoft plans to announce thousands of job cuts in early July 2025. These layoffs are expected to align with the start of the company’s new financial year and will primarily impact the global sales and marketing organization, as well as the Xbox gaming division.

Within Xbox, Bloomberg sources anticipate substantial reductions across all departments, signaling a major internal restructuring. This marks the fourth significant round of layoffs targeting the Xbox unit in just 18 months. Since Microsoft completed its $69 billion acquisition of Activision Blizzard in 2023, the gaming division has faced increasing pressure to improve profit margins. 

Microsoft Layoffs History: An Ongoing Trend

The July 2025 layoffs are part of a broader effort by Microsoft to streamline operations and reallocate resources towards areas with higher strategic importance. These upcoming cuts follow closely on the heels of other recent reductions.

Microsoft’s current restructuring is part of a longer-term pattern of workforce adjustments that dates back several years. The company has been rebalancing its headcount through a combination of aggressive hiring and targeted layoffs, aligning its employee base with its evolving business goals.

Here’s a summary of recent Microsoft layoffs:

Source: Bloomberg, Economic Times, Indian Express, GreekWire & Thurrott

Microsoft Layoffs DEI Team: What Happened?

The latest round of layoffs follows Microsoft’s July 2024 decision to cut roles linked to its Diversity, Equity, and Inclusion (DEI) efforts. Initial reports claimed the entire DEI team had been let go, but the company later clarified that only two event-related roles were eliminated, with its core DEI function still intact. 

Despite this, the move drew criticism, especially after a former DEI leader warned in a company-wide email that “true systems-change work” in DEI was no longer seen as essential, reflecting a broader shift in corporate priorities.

Why is Microsoft Laying Off Employees?

The driving force behind Microsoft’s workforce reductions is its ambitious investment in artificial intelligence (AI). The company has committed to spending $80 billion in FY25 on AI-related infrastructure, particularly on building and upgrading data centers. This level of spending is placing considerable pressure on Microsoft’s operating margins.

To help offset this pressure, the company is actively looking for cost-cutting opportunities. According to an analyst at D.A. Davidson, Microsoft may need to reduce its headcount by at least 10,000 employees each year just to maintain margin stability while continuing to invest heavily in AI initiatives.

Microsoft CEO Satya Nadella has publicly stated that the layoffs are not a reflection of individual or team performance, but rather a repositioning designed to prepare Microsoft for the future. He emphasized that these adjustments are aimed at concentrating talent and resources on areas of strategic growth, with artificial intelligence sitting at the center of that vision.

Tech Layoff Trend: Which company has the most layoffs?

Microsoft’s layoffs are not isolated. The tech sector as a whole is undergoing a significant transformation, driven by a renewed focus on operational efficiency and technological reinvention. From January to May 2025 alone, more than 62,000 tech workers lost their jobs, following over 240,000 layoffs throughout 2024, according to ET.

Here a list of recent layoff trends at other major tech firms:

Source: Company Reports, Times Of India, Crunchbase, Bloomberg, Reuters, ET
Data as of June 2025

Tech layoffs in 2025 have crossed 61,000 across 130+ companies, according to multiple media reports. This wave is driven by a pivot to AI, investor pressure, and pandemic-era over-hiring corrections. Big players like Microsoft and ha are restructuring to funnel resources into AI talent and infrastructure. 

Microsoft is planning more cuts in sales as it doubles down on AI, while Amazon’s CEO has hinted at long-term corporate job reductions due to generative AI. Investors are demanding profitability over growth, pushing companies to flatten organization charts and cut costs. 

Many also admit they over-hired during Covid and are now realigning for long-term sustainability. The result? A reshaped tech job market which is leaner, AI-focused, and still bleeding roles.

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