Microsoft cuts 4,800 employees, restructure Xbox unit:Decision due to increased spending on AI infrastructure; company’s share fell 20%

Microsoft is cutting about 2.1% of its total workforce, with approximately 4,800 employees being laid off. Amidst ongoing layoffs in the tech industry, the Windows-making giant has taken this decision due to heavy spending on AI infrastructure and to increase business efficiency. Increased spending on AI has put pressure on tech companies Big tech companies are expected to spend more than $700 billion on AI this year. This is increasing pressure on companies to demonstrate a return on investment and to reduce the high costs of implementing the technology. Due to this pressure, Amazon and Meta Platforms have also laid off thousands of their employees this year. Microsoft’s share fell 20% in 6 months Microsoft announced these layoffs on Monday after a difficult half-year. In the first six months of 2026, the company’s shares fell by approximately 20%, marking the company’s worst half-year performance since 2022. Company often conducts layoffs at the end of June Earlier this year, software giant Microsoft offered a voluntary buyout to about 7% of its US workforce, or approximately 9,000 employees. Microsoft often cuts jobs in June, near the end of its financial year, as this is when the company finalizes its spending plans for the new financial year. Rising cost of building data centers impacts cash flow Due to strong AI demand, Microsoft’s Azure cloud computing business has seen good growth, as it was the exclusive seller of OpenAI’s models until April. However, the continuously increasing cost of building data centers to support these services has put heavy pressure on the company’s cash flow. $190 Billion Capital Expenditure Estimate for 2026 The company may announce its quarterly results at the end of this month. Earlier in April, the company had projected quarterly Azure revenue higher than Wall Street estimates.
Along with this, the company has estimated a capital expenditure of $190 billion for the year 2026, which is significantly higher than analysts’ expectations. Company Forced to Increase Xbox Console Prices AI tools that automate routine business tasks have also emerged as a challenge for Microsoft’s software business. Additionally, memory chip prices have surged due to data center demand. Due to this, the company has been forced to increase the prices of its Xbox gaming console, even though its demand in the market was already weak. Gaming Division’s Profit Margin Falls to 3% Asha Sharma, the new head of the gaming division, said last month that the business needed a ‘reset’. The gaming division’s profit margin has fallen to 3 percent, making restructuring necessary. This restructuring may also include potential mergers and acquisitions (MA). In a memo sent to employees and published on the company’s website, Asha Sharma said that excluding Activision Blizzard King, over the past five years, we have spent more than $20 billion on ongoing investments in our content, platforms, and hardware subsidies. However, during this period, our annual revenue has decreased by about half a billion dollars. This cannot be allowed to continue in the future. According to a media report, the company is considering options to make the Xbox gaming unit a separate company or restructure it as a wholly-owned subsidiary.