Microsoft plans to cut less than 2.5% of its workforce, about 228,000 employees, per an insider. This follows July 2025 layoffs of roughly 4% of staff. The upcoming cuts will affect multiple divisions, with sales, consulting, and Xbox most impacted. The move comes as the firm accelerates investment in AI infrastructure, hoping to offset slowing growth in services.

The Xbox division faces particular scrutiny after Microsoft raised console prices three times in the past year, citing rising component costs. Repeated price hikes and now staff reductions suggest internal pressure on the gaming business, which has struggled to meet revenue expectations. These pressures also question Microsoft's commitment to first‑party games.

The layoffs align with a trend among tech giants to divert payroll dollars into AI data centers and chip development, citing tools like Copilot that render certain roles obsolete. While Microsoft has not issued a formal announcement, the insider leak underscores a strategic pivot that could tighten margins for consumers, especially gamers facing higher hardware costs. Retailers may adjust pricing to absorb tighter cost structure.