American tech giant Microsoft has decided to lay off approximately 4,800 employees in a fresh wave of downsizing. The number represents approximately 2.1 per cent of the company's total workforce. The company has taken this step as part of its strategy to rapidly increase investments in artificial intelligence (AI) and improve business efficiency.
This new wave of layoffs comes amid heavy spending on AI in the tech sector. Amazon and Meta have also laid off thousands of employees this year.
It is estimated that large tech companies will spend more than $700 billion on AI infrastructure by 2026. This puts pressure on companies to achieve better returns from AI and control rising costs.
Microsoft shares fell 23%
Microsoft's announcement on Monday comes amid pressure on its shares this year. In the first half of 2026, Microsoft shares fell nearly 23 per cent, marking its worst first six-month performance since 2022.
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The company has previously offered voluntary separation to approximately 7 per cent of its US workforce, or approximately 9,000 people, by 2026. Microsoft has been revising its workforce every year in June after the end of its fiscal year while planning new budgets and expenditures.
While Microsoft's Azure Cloud business continues to benefit from growing demand for AI. Until April, Azure was the exclusive platform for selling OpenAI's models. The cost of building large-scale data centres for AI services is putting pressure on the company's cash flow.
$190 billion in spending estimates for 2026
In April, the company forecast Azure sales for the current quarter, beating Wall Street expectations, and projected spending of about $190 billion for 2026, significantly higher than market estimates.
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Experts believe that AI is now automating many routine business tasks. This could also impact traditional software businesses. Meanwhile, rising data centre demand has led to higher prices for memory chips, forcing Microsoft to raise the price of its Xbox consoles despite already weak demand.