Microsoft confirmed on Wednesday it is laying off up to 9,100 employees, its largest workforce reduction since 2023. The cuts affect roughly 4% of its global staff and are part of a broad, ongoing effort to streamline the company and reallocate resources to fund its massive strategic investment in artificial intelligence.
The move marks the culmination of a fiscal year defined by relentless restructuring. It follows previous waves of layoffs in May and June, signaling an aggressive reshaping of the company to prioritize its future in AI, even while it remains highly profitable.
A Year of Continuous Restructuring
This is not an isolated event but the latest step in a sustained campaign to realign the company. The current cuts follow reports in June that Microsoft was targeting its global sales division for thousands of job losses, a plan this week’s announcement appears to confirm.
Just weeks prior, in May, the company eliminated nearly 3% of its global workforce, impacting around 7,000 employees. At the time, a spokesperson for the Redmond giant explained the move was part of an effort to “implement organizational changes necessary to best position the company for success in a dynamic marketplace.”
That earlier round specifically focused on increasing agility by reducing management layers. The fiscal year began with performance-based cuts in January, which targeted employees deemed to be underperforming. This series of reductions establishes a clear pattern of continuous workforce adjustments.
This strategy marks a significant shift from the previous year. It stands in stark contrast to the company’s actions in July 2024, when it issued special one-time cash bonuses to its workforce. The last major round of cuts of this scale was the elimination of 10,000 roles in 2023.
Funding the Future: The High Cost of an AI Pivot
The underlying strategy appears to be a direct reallocation of capital. Microsoft is redirecting savings from its payroll to fuel a massive, multi-billion dollar investment in its artificial intelligence infrastructure, a move one AInvest calls a calculated gamble.
These enormous capital expenditures, reportedly planned to reach $80 billion in 2025, are essential for building out and powering its Azure AI services and the increasingly ubiquitous Copilot tools. CEO Satya Nadella sees these technologies as the absolute core of the company’s future growth and competitive edge.
Nadella has consistently framed these difficult changes as a necessary evolution for the company’s long-term health. In a previous statement on restructuring, he emphasized, “This was not about people failing. It was about repositioning for what comes next.”
This approach of pairing deep, painful job cuts with huge strategic bets on AI has found favor on Wall Street. Investors have rewarded the company’s demonstrated “cost discipline,” viewing it as a prudent strategy for long-term growth in the AI era.
Raising the Bar: A New Era of Performance Management
Parallel to the workforce reductions, Microsoft is systematically tightening its internal performance standards. This signals a significant cultural shift towards increased accountability and efficiency across the entire organization, moving away from what some insiders previously called a “country club” culture.
In April, the company formalized its Performance Improvement Plan (PIP) process. Underperforming employees are now presented with a stark choice: engage with the demanding improvement plan or accept a Global Voluntary Separation Agreement (GVSA) to exit the company.
Further codifying its new, stricter standards, Microsoft implemented a formal two-year rehire ban for any employee let go for performance-related reasons. Those with low scores are also ineligible for internal transfers.
Internal documents also revealed the company now tracks these performance-based exits under the metric “good attrition,” a term that signifies departures the company views as beneficial to its overall talent pool. This mirrors practices at Amazon and Meta.
Chief People Officer Amy Coleman said the changes aim to address performance challenges with clarity and empathy. She stated that “our focus remains on enabling high performance to achieve our priorities spanning security, quality, and leading Al,” adding the ultimate goal is “fostering a culture where high-performing, winning teams can thrive.”
This philosophy aligns with earlier comments from CFO Amy Hood, who emphasized a focus on “on building high-performing teams and increasing our agility by reducing layers with fewer managers.” The message from leadership is clear: the company is being reshaped to be leaner and more focused on high-impact teams.
Microsoft’s actions are emblematic of a broader, more aggressive trend sweeping Big Tech. The industry has shed over 75,000 jobs in the first five months of 2025 alone as giants like Google and Meta pursue similar AI-driven efficiencies.
Meta CEO Mark Zuckerberg, for instance, has explicitly stated his intent to “raise the bar on performance management and move out low-performers faster,” a sentiment that echoes across the sector as the race for AI dominance intensifies.
For the thousands of employees caught in this strategic realignment, this new era means job security is now inextricably linked to a company’s evolving, and often ruthless, technological ambitions.
