A major tech reshuffle is underway, with decisions that will reshape teams and priorities across Microsoft’s commercial and gaming divisions. The full impact remains unclear.

Microsoft is cutting about 4,800 jobs, which amounts to roughly 2.1% of its total workforce, as part of a restructuring of parts of its commercial and gaming divisions, joining the wave of tech-sector layoffs where investments in artificial intelligence are shifting priorities and cost structures.

Shares fell 1.5% in morning trading.

Big tech players are spending more than $700 billion on artificial intelligence this year, which is putting pressure on companies to demonstrate profitability from this technology and offset the rising costs of deploying it. Amazon and Meta Platforms have also significantly reduced their headcounts this year.

In an internal memo to employees, Chief People Officer Amy Coleman noted that artificial intelligence is changing the way work is done by automating some routine tasks, but the layoffs are part of a broader review of resources and operating structures in line with the company’s priorities.

I also want to be frank: the roles being cut today will not be replaced by artificial intelligence. At the same time, the truth is that AI is changing the way work is done.

– Amy Coleman

Microsoft announced the layoffs on Monday after its shares had fallen nearly 23% in the first six months of 2026 – the worst first-half performance since 2022.

This year the company previously offered voluntary buyouts of about 7% of its staff in the United States, roughly 9,000 employees. The company typically trims its headcount at the end of its fiscal year in June to determine expenses for the new year.

Microsoft reduced its headcount to fund its investments in AI. By trimming headcount, they managed to accelerate revenue growth while maintaining the same margin.

– Gil Luria

Rising demand for artificial intelligence underpins the growth of Azure – Microsoft’s cloud division – which for a long time had been the main supplier of OpenAI models until April, but rising costs of building data centers are weighing on the company’s cash flows.

The company is expected to report results later this month. In April, Microsoft forecast Azure quarterly sales above expectations, while outlining outlays of $190 billion in 2026, well above analysts’ expectations.

RESTRUCTURING OF THE GAMING DIVISION

The new head of the gaming division, Asha Sharma, said last month that the business needs a “reboot,” and its margin has fallen to 3%, prompting a restructuring that could include a possible merger or acquisition.

“Apart from Activision Blizzard King, over the last five years we have spent more than $20 billion on ongoing investments in our content, platform, and hardware subsidies, but our annual revenue during that time has fallen by almost half a billion dollars. This cannot continue in the future,” she said in a memo published on Microsoft’s website.

The company is weighing options for Xbox – from a possible separation of the division to restructuring it as a full subsidiary, according to reports last month.

In the broader context, analysts emphasize that Microsoft continues to adapt to the new AI reality, seeking a balance between innovation and financial sustainability, and expects further steps on cost and resource management in upcoming periods.

Today, the company focuses on developing data infrastructure and integrating artificial intelligence into its products and services, considering how these changes will affect long-term profitability and market competitiveness.

In conclusion, Microsoft continues through a phase of reorganization, aiming to preserve growth momentum amid rising AI costs and the need for more efficient deployment of innovative technologies across its business units.