Microsoft (MSFT) stock fell 19% in June, its worst monthly performance since the dot-com bubble burst in the early 2000s. Meanwhile, according to the New York Post citing Business Insider sources, Microsoft is expected to announce its third major round of layoffs in over a year next week, affecting fewer than 5,500 people. The layoffs will primarily impact the sales and consulting divisions, as well as the Xbox gaming division.
Timeline of Three Rounds of Layoffs: Over 20,500 Total Between May 2025 and July 2026
Microsoft has implemented three major rounds of layoffs since May 2025:
May 2025 (Round 1): Approximately 6,000 people were laid off in response to post-pandemic growth slowdown.
July 2025 (Round 2): Approximately 9,000 people were laid off, accounting for about 4% of the total workforce at the time, as the company began resource restructuring.
July 2026 (Round 3): Reports indicate fewer than 5,500 people will be laid off, focusing on sales, consulting, and Xbox divisions.
Prior to the formal layoffs, Microsoft offered a "voluntary retirement buyout program" for U.S. employees (applicable to those with a combined age and tenure of 70 years or more). About 9,000 employees were eligible, and one-third chose to accept, reducing the number of forced layoffs in this round to fewer than 5,500.
Xbox Division Struggles: Chip Shortages, $150 Hardware Price Hike, and Studio Closures
New Xbox CEO Asha Sharma has publicly stated that the company is "not in a healthy state." Massive demand for AI data centers has squeezed chip production capacity, causing Xbox hardware costs to continue rising, with a recent hardware price increase of $150. Xbox has also closed several studios and canceled multiple games in development. The division is one of the key areas affected by this round of layoffs.
$190 Billion AI Investment Pressure: Microsoft Stock's June Drop Is Worst Monthly Since the 2000s
Microsoft has committed to investing $190 billion in next-generation AI infrastructure over the next few years. This massive expenditure faces dual pressures: AI advancements threaten to replace traditional software tools, while huge capital outlays simultaneously compress short-term profit margins. These factors are directly reflected in the capital markets: Microsoft stock fell 19% in June 2026, the worst monthly decline since the dot-com bubble burst in the early 2000s.
Tech Industry AI Layoff Data: Challenger, Gray & Christmas Report Reveals Industry-Wide Trend
According to the latest report from Challenger, Gray & Christmas, nearly one-third of global layoffs so far in 2026 have been in the tech sector. As of June 2026, AI has been the most commonly cited reason for corporate layoffs for four consecutive months. Since 2023, a cumulative nearly 174,000 jobs worldwide have been eliminated due to AI transformation or job displacement. The construction of AI data centers continues to divert chip and capital resources, while traditional departments—including consumer hardware and software sales—are being squeezed to balance financial statements.
Frequently Asked Questions
Which departments are affected by this round of layoffs, and what is the scale?
According to the New York Post citing Business Insider, fewer than 5,500 people will be affected, accounting for about 2.5% of Microsoft's global workforce of 220,000. The hardest-hit areas are the sales and consulting divisions, as well as the Xbox gaming division.
What does Microsoft's 19% stock drop in June 2026 signify historically?
Microsoft stock fell 19% in June 2026, its worst monthly performance since the dot-com bubble burst in the early 2000s.
What is the scale of Microsoft's AI investment, and how is it directly related to the layoffs?
Microsoft has committed to investing up to $190 billion in next-generation AI infrastructure. The massive AI capital expenditure is squeezing resources for traditional departments, leading to downsizing in non-AI core functions such as sales and consulting. AI advancements also risk making some traditional software tools obsolete.
