Microsoft shares fall over 1% after company announces to layoff 4,800

Microsoft shares fell more than 1% on Monday after the company said it would cut about 4,800 jobs as part of a broader restructuring that will hit its Xbox gaming business. The stock was down 1.4% in Monday trading. The fall came after a weak first half for Microsoft shares, which dropped nearly 23% in the first six months of 2026, their worst first-half performance since 2022.

The latest layoffs will affect about 2.1% of Microsoft’s global workforce. The gaming division will see the deepest cuts, with around 3,200 roles being eliminated. Of these, about 1,600 employees were laid off on Monday, according to reports.

The restructuring comes after Microsoft spent heavily to expand its gaming business, including its $68.7 billion acquisition of Activision Blizzard. Even after that deal, Xbox has struggled to close the gap with Sony’s PlayStation and Nintendo in console gaming. The company has also moved away from relying mainly on exclusive Xbox titles and is now taking more of its games to other platforms.


As part of the changes, Microsoft will separate four Xbox studios from the company. Compulsion Games, known for South of Midnight, and Double Fine Productions, the maker of Psychonauts, will become independent studios. Ninja Theory and Undead Labs will also be spun off as they continue work on Senua and State of Decay 3. Microsoft is also reviewing options for Arkane Studios in France, which developed Dishonored and is working on a game based on Marvel’s Blade.

The cuts come at a time when large technology companies are under pressure to control costs while spending heavily on artificial intelligence. Microsoft, Amazon and Meta have all reduced jobs this year even as they continue to invest billions of dollars in AI infrastructure. Big Tech’s AI spending is expected to top $700 billion this year, increasing pressure on companies to show returns from those investments.

Microsoft’s Chief People Officer Amy Coleman told employees in a memo that the roles eliminated were “not being replaced by AI.” But she also said AI is changing how work gets done.

The company’s Azure cloud business has benefited from strong demand for AI services. Microsoft was also the exclusive seller of OpenAI’s models until April. But the cost of building data centres and running AI services has put pressure on cash flows.

The latest round also follows voluntary buyouts offered earlier this year to about 7% of Microsoft’s US workforce, or around 9,000 employees. Microsoft often trims roles near the end of its fiscal year in June as it resets spending plans for the next year.