Microsoft makes layoffs and promises more
“We are still early on this journey, and there will be more changes ahead"
Microsoft
Microsoft is cutting 4,800 jobs and says more layoffs are coming.
Microsoft’s Chief People Officer Amy Coleman revealed the plans in a letter to staff that the company published online on Monday, June 6.
Cuts “mostly fall within our Commercial and XBOX organizations,” she said.
XBOX CEO Asha Sharma separately posted on X that XBOX was making “approximately 1,600 role eliminations today” – which suggests loosely that some 3,200 of the cuts are falling on Microsoft’s commercial organisation.
The commercial organisation job cuts “build on” Redmond’s creation of new operating business called Microsoft Frontier Company, Coleman added.
That’s a new entity that will embed engineers at customers to deliver value for AI projects. It was not immediately clear how the layoffs “build” on that.
More Microsoft layoffs to follow?
More Microsoft layoffs will follow as it restructures, Coleman suggested.
“We are still early on this journey, and there will be more changes ahead; other parts of our business will need to make similar changes,” she said.
“Engineering teams across the company will also evolve their structure and priorities to meet customer needs and innovate for the future…”
The move comes as Microsoft's headcount has grown sharply in recent years.
In June 2021 it employed approximately 181,000 people on a full-time basis, 103,000 in the US and 78,000 internationally.
By June 2025 that figure had grown to 228,000 people on a full-time basis, 125,000 in the US, 103,000 internationally.
That's an addition of some 47,000 more staff in six years.
Microsoft needs to lead by example
“AI is changing how work gets done,” said Coleman.
“Some of the tasks we do every day can now be automated… 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.”
XBOX chief: “We lost 64 cents for every dollar”
XBOX meanwhile is also cutting loose four games studios: two will return to their management; two will be taken on by new owners, Sharma said.
She wrote: “We have also learned that we are not the best home for every type of studio; in a typical year, we lost 64 cents for every dollar we invested” – and blamed management bloat for poor performance.
“Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined… We will reduce management layers to no more than 5.”
Two pizzas, please?
Her comments come as senior leaders at other hyperscalers also publicly lament a rise in management bloat and the demise of the “two-pizza” team.
Amazon CTO Werner Vogels publicly called for more agility on June 30.
Writing in his personal blog, Vogels said: “It’s simple physics: as systems grow, so does their entropy… Org structures become layered, dependencies multiply, and approval cycles appear where none existed before…”
This tendency towards inertia “begins to work against the very culture that made it successful” he said, calling for a return to two-pizza teams. “It is time to amend the way we think about the process that’s brought us this far.
Microsoft CFO: We need to convert CapEx to revenue
The Microsoft layoffs follow a record third-quarter in May.
Redmond’s margins fell year-on-year and operational expenditure rose sharply however due to what CFO Amy Hood said was “continued investment in AI infrastructure and growing AI product usage.
She added: “The focus needs to be on… landing this CapEx as quickly as we can and converting it to revenue as quickly as we can."