Microsoft cut 4,800 jobs on July 6, 2026 — about 2 out of every 100 employees across the company. The cuts came in two waves on the same day: one affecting the Xbox gaming division, which the company had publicly warned about, and a second hitting its Commercial Business group (the division that sells to other companies), which surprised many people in the industry. Engadget

The Xbox Side

Xbox leaders had told employees in early June that the gaming division had spent too much money buying up game studios over the past decade and was losing money overall. On July 6, the cuts arrived: 1,600 people laid off immediately, with another 1,600 to follow before the end of the year — a total of 3,200 jobs gone, or roughly one in five Xbox workers. NBC News CNBC

Microsoft also sold off four game studios it owned — Compulsion Games, Double Fine, Ninja Theory, and Undead Labs — and is thinking about closing a fifth one called Arkane. Rather than shutting them down completely, Microsoft is letting other companies own them but keeping deals to share revenue or publish their games.

The Business Surprise

But there is more to the story. On the same day, Microsoft cut another 3,200 jobs in divisions outside gaming, hitting the team that sells cloud services and software to other businesses hardest. This round was not announced ahead of time. Engadget

Microsoft's chief people officer, Amy Coleman, said these jobs are not being replaced by artificial intelligence or robots — a careful choice of words, since companies getting rid of workers to AI has become a sensitive topic. She did note, though, that AI could displace jobs down the line. In other words, Microsoft is saying AI did not cause these particular cuts, but it might in the future.

About 600 of the laid-off workers were based in Washington state, near Microsoft's headquarters in Redmond. GeekWire

A Pattern Over Three Years

This is not the first time. Microsoft cut 9,000 jobs in July 2025 and cut nearly 2,000 from Xbox in early 2024. That means in the span of 30 months, Microsoft has laid off workers three separate times, with Xbox hit especially hard.

Looking at all three rounds, Microsoft appears to be deliberately shrinking its costs in certain areas — fewer workers in sales, fewer game studios it owns — while spending heavily on artificial intelligence and cloud computing. The company is pouring vast amounts of money into the computer power that AI systems need. Cutting salespeople while building up that infrastructure makes sense from a business standpoint, even if it looks bad to announce growth spending and job losses at the same time.

One other thing to notice: by announcing both the expected Xbox cuts and the surprise business cuts on the same day, Microsoft bundled the negative news into one story rather than spreading it across multiple news cycles. Whether that was planned that way or just happened is unclear from what Microsoft has said publicly.

What Microsoft is essentially doing is betting that AI tools can help its salespeople do more with fewer people, and that cloud services will make up for the jobs and game studios it has cut. Whether that gamble works out remains to be seen.