Microsoft’s largest layoff in years hits Xbox, sales and other divisions

The Microsoft campus in Mountain View, California, U.S.

REDMOND, Wash. — Microsoft says it is laying off about 9,000 workers, its second mass layoff in months and its largest in more than two years.

The tech giant began sending out layoff notices Wednesday that hit the company’s Xbox video game business and other divisions.

Among those losing their jobs are 830 workers tied to Microsoft’s headquarters in Redmond, Washington, according to a notice sent to state officials Wednesday.

Microsoft said the cuts will affect multiple teams around the world, including its sales division, part of “organizational changes” needed to succeed in a “dynamic marketplace.” The company won’t say the total number of layoffs except that it was about 4% of the workforce it had a year ago.

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A memo to gaming division employees Wednesday from Xbox CEO Phil Spencer said the cuts would position the video game business “for enduring success and allow us to focus on strategic growth areas.”

Xbox would “follow Microsoft’s lead in removing layers of management to increase agility and effectiveness,” Spencer wrote.

Microsoft employed 228,000 full-time workers as of June 2024, the last time it reported its annual headcount. Its latest layoffs would cut fewer than 4% of that workforce, according to Microsoft. But it has already had at least three layoffs this year and it’s unlikely that new hiring has matched the amount lost. Either way, a 4% cut would amount to somewhere in the range of 9,000 people.

Until now, this year’s biggest layoff was in May, when Microsoft began laying off about 6,000 workers, nearly 3% of its global workforce and its largest job cuts in more than two years.

The cutbacks come as Microsoft continues to invest huge amounts of money in the data centers, specialized computer chips and other infrastructure needed to advance its AI ambitions. The company anticipated those expenses would cost it about $80 billion in the last fiscal year. Its new fiscal year began Tuesday.

Microsoft just last month cut another 300 workers based out of its Redmond headquarters, on top of nearly 2,000 who lost their jobs in the Puget Sound region in May, most of them in software engineering and product management roles, according to information it sent to Washington state employment officials.

Microsoft’s chief financial officer Amy Hood said on an April earnings call that the company was focused on “building high-performing teams and increasing our agility by reducing layers with fewer managers.”

The company has repeatedly characterized its recent layoffs as part of a push to trim management layers, but the May focus on cutting software engineering jobs has fueled worries about how the company’s own AI code-writing products could reduce the number of people needed for programming work.

Microsoft CEO Satya Nadella said earlier this year that “maybe 20, 30% of the code” for some of Microsoft’s coding projects “are probably all written by software.”

The latest layoffs, however, seemed centered on slower-growing areas of the company’s business, said Wedbush Securities analyst Dan Ives.

“They’re focused more and more on AI, cloud and next-generation Microsoft and really looking to cut costs around Xbox and some of the more legacy areas,” Ives said. “I think they overhired over the years. This is Nadella and team making sure that they’re keeping with efficiency and that’s the name of the game in Wall Street.”

The trimming of the Xbox staff follows Microsoft’s years-long expansion of the business surrounding its gaming console, culminating in 2023 with the $75.4 billion acquisition of Activision Blizzard -- the California-based maker of hit franchises like Call of Duty and Candy Crush.

Before that, in a bid to compete with Sony’s PlayStation, it spent $7.5 billion to acquire ZeniMax Media, the parent company of Maryland-based video game publisher Bethesda Softworks.

Many of those game studios, which have locations across North America and Europe, were struggling with the layoffs Wednesday, according to social media posts from employees who announced they were looking for new jobs.

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Matt O’brien, The Associated Press