Microsoft to cut ~5,500 jobs — Xbox first as hardware bleeds $500M over five years
TL;DR
Microsoft is set to cut ~5,500 jobs next week — under 2.5% of its 228,000 headcount — hitting Xbox, sales and consulting as FY2026 closes.
Microsoft will start a fresh round of layoffs next week, hitting under 2.5% of its global workforce — roughly 5,500 seats against a 228,000 headcount. GeekWire and The Next Web reported on July 1 that the cuts target Xbox, sales and consulting, timed to the end of fiscal 2026 and the start of fiscal 2027.
A year ago Microsoft cut close to 4% at the same moment on the calendar — the largest single round in recent years. This round is half the size but not less frequent: it is the third headcount reduction in six months, and on top of a voluntary retirement offer earlier this year the two-year total is now above 25,000.
Xbox surfaced first. Xbox chief Sarah Bond in a leaked internal memo last month acknowledged that the console business has shed $500 million of revenue over five years while spending more than $20 billion on content, platform and hardware subsidies over the same window. Xbox is expected to close FY2026 at a 3% accountability margin, down year-over-year. The day the memo leaked, unionized Xbox workers told Kotaku they «will not be treated as disposable».
Sales and consulting sit on a different ledger. Microsoft's FY2026 AI capex is heading toward $90 billion, exceeding a single year of operating profit. Challenger counted 123,653 US tech layoffs in the first five months of 2026, up 66% year-over-year, with 87,714 of them attributed to «AI» — already past the full-year 2025 total in under half a year.
Bond wrote in the memo that the next move is «a more affordable next-generation console tier». If it works, a cheaper box pulls paying users back. If it doesn't, $20 billion and 5,500 seats are what that sentence cost.
via GeekWire / The Next Web / Kotaku / Massively OP
A year ago Microsoft cut close to 4% at the same moment on the calendar — the largest single round in recent years. This round is half the size but not less frequent: it is the third headcount reduction in six months, and on top of a voluntary retirement offer earlier this year the two-year total is now above 25,000.
Xbox surfaced first. Xbox chief Sarah Bond in a leaked internal memo last month acknowledged that the console business has shed $500 million of revenue over five years while spending more than $20 billion on content, platform and hardware subsidies over the same window. Xbox is expected to close FY2026 at a 3% accountability margin, down year-over-year. The day the memo leaked, unionized Xbox workers told Kotaku they «will not be treated as disposable».
Sales and consulting sit on a different ledger. Microsoft's FY2026 AI capex is heading toward $90 billion, exceeding a single year of operating profit. Challenger counted 123,653 US tech layoffs in the first five months of 2026, up 66% year-over-year, with 87,714 of them attributed to «AI» — already past the full-year 2025 total in under half a year.
Bond wrote in the memo that the next move is «a more affordable next-generation console tier». If it works, a cheaper box pulls paying users back. If it doesn't, $20 billion and 5,500 seats are what that sentence cost.
via GeekWire / The Next Web / Kotaku / Massively OP
