Microsoft announced its laying off more than 2% of its workforce, which is largely affecting the Xbox division.
Concretely, the company will eliminate 4,800 jobs. Microsoft's chief people officer Amy Coleman said in a message to employees that the "way technology is built, deployed, and used is transforming faster than at any point in my time here."
Xbox CEO Asha Sharma told division employees that the division will cut 3,200 people through fiscal year 2027, two thirds of all the layoffs in the company and about 20% of all employees working in Xbox. 1,600 of them are taking place on Monday.
"I recognize that a year-long restructuring creates additional challenges," Sharma said in a passage of the message, according to CNBC. "Unfortunately, it is not possible to make all the necessary changes in a single day." He said the division will return to growth next year.
The outlet noted that Microsoft has seen the worst performance of all megacap tech stocks so far this year, falling by 19% by Friday's close. It was also losing more than 1% on Monday following the news. CNBC said that while the company saw accelerating growth in cloud services and LinkedIn, other areas were lagging, including Windows operating system licenses, Surface devices and the Xbox unit.
Coleman said AI won't replace the workers being laid off. "At the same time, what is true is that AI is changing how work gets done," she wrote. "Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves. Our customers are navigating this same shift, and they're counting on us to help them through it. We can't do that well unless we're doing it ourselves."
Company CEO Satya Nadella has criticized the way the AI race has been unfolding, saying people won't tolerate a sort of oligarchy where a few companies concentrate most of the power.
"You can't say, hey, all white-collar jobs are gone and this could even be a weapon and we will use all the power to build data centers," Nadella told The Wall Street Journal in an interview.
He went on to say that people won't tolerate a scenario where a few, powerful companies do "all the learning for the world."
The outlet noted that Microsoft has released low-cost models aimed at driving prices down as they increase elsewhere. It is also reportedly considering hosting a version of low-cost China-based DeepSeek, which other large companies have called out for copying their main models.
The WSJ said Microsoft has trailed other large companies in developing its own AI models, noting that late last year subscribers of Copilot largely preferred other options, including Google's Gemini.
Elsewhere in the interview, Nadella criticized those saying that the rise of AI will lead to massive job losses. "No, how about we think about reorganizing the jobs?" he said. Yes, it's a lot of change management, it's a lot of displacement, but there is a path," Nadella added, calling for companies to give a "recipe for how that can be done." "We now have to do the hard work in earning the social permission," he concluded.
