Microsoft lays off thousands of employees to go all in on AI!
ComputerWorld.com reported that Microsoft “… laid off 4,800 people, a little more than 2% of its worldwide workforce, with its Xbox division hit hardest. And it’s not reducing its massive spending on AI data centers or other AI-related costs.” The July 14, 2026 article entitled “With its latest layoffs, Microsoft goes all in on AI” (https://www.computerworld.com/article/4196309/with-its-latest-layoffs-microsoft-goes-all-in-on-ai.html) included these comments:
The New York Times explained the cuts this way: “It is Microsoft’s latest employee culling as it plows tens of billions of dollars into the infrastructure for building artificial intelligence.”
Was cutting back on gaming (while still going all-in on AI) the right move for Microsoft? To answer that, let’s take a look at the details of the company’s July layoffs.
The recent cuts come in the wake of larger Microsoft workforce reductions over the last year or so. In May 2025, the company laid off 6,000 employees, about 3% of its workforce. Then a few months later, it laid off 9,000 more, about 4% of its workers. In both rounds of cuts, the company’s gaming division was hit — though it wasn’t the primary target.
This year, in April and May, the company rolled out its first voluntary retirement program for US employees. Approximately 3,000 people took the money and ran.
Then came last week, when Microsoft primarily targeted gaming. When the cuts take full effect over the next year, 2,850 gaming employees will be let go. In addition, Microsoft is cutting loose several of its gaming studio brands, which will become independent companies or be sold to buyers.
The layoffs hit the two remaining gaming studios, Activision Blizzard, which makes the big-selling games Call of Duty and Candy Crush, and ZeniMax Media, which publishes series including Fallout and The Elder Scrolls. Three years ago, in 2023, Microsoft bought Activision Blizzard for $69 billion. That followed its purchase of ZeniMax Media in 2020 for $7.5 billion. Both seemed like sizable acquisitions at the time.
Anyone surprised?