Media reports indicate that Microsoft is planning to lay off thousands of employees. Is this a good sign?

Microsoft plans to announce layoffs in the near future that could affect more than 5,000 employees, Business Insider reported, citing sources. Over the past month, shares of the software market leader have fallen by nearly 20%— the worst performance since the dot-com era. The stock price is under pressure due to investor concerns about the justification for multibillion-dollar spending on AI and threats to the corporation’s core business.

The tech giant, which lost about $600 billion in market capitalization in June, is preparing to announce a new round of layoffs next week, according to sources who spoke with BI. According to them, thousands of positions will be cut: the layoffs will primarily affect the sales and consulting departments, as well as the Xbox gaming division. The exact timing of the official announcement may still change.

This round will be less extensive than last year’s staff cuts. According to insiders, Microsoft will let go of less than 2.5% of its global workforce of 220,000 people, meaning up to 5,500 employees will be laid off. At the same time, some employees will immediately be offered alternative positions within the company, BI reports.

Issuing companies' efforts to optimize costs are a positive sign for Wall Street. Following the announcement of layoffs at Microsoft, its shares are up nearly 1% in after-hours trading in the U.S.

In late June, following news of an Xbox price increase, the financial holding company Stifel lowered its annual price target for Microsoft shares from $415 to $400 per share while maintaining a neutral rating. At the same time, the overwhelming majority of analysts recommend increasing holdings in the company (with “Buy” and “Overweight” ratings), and none of the experts advise selling its now-cheaper shares.

Fundstrat argues that the June sell-off in the stocks of the “Magnificent Seven”—the seven most valuable U.S. technology companies—despite the continued “bullish” trends, presents investors with an attractive opportunity to buy them at a discount.

Layoffs at Microsoft traditionally coincide with the start of the new fiscal year, which begins on July 1. In 2025, the company carried out a much more drastic workforce reduction, cutting 6,000 jobs in May and another 9,000 in July. This time, a voluntary retirement program with severance pay, offered to the company’s American veterans, helped avoid such drastic measures. According to BI, of the 9,000 employees (7% of the U.S. workforce) who met the program’s criteria, approximately one-third accepted the offer.

For tech giants forced to spend tens of billions of dollars on infrastructure for artificial intelligence services, mass layoffs have become a common way to cut costs. Other leaders in AI investment—Oracle and Meta Platforms—have taken steps over the past year to cut staff on a scale comparable to Microsoft’s, Bloomberg reported.

This article was AI-translated and verified by a human editor