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Report: Microsoft Targets Xbox in Massive 22,000 Job Cut Plan
Microsoft is reportedly preparing to cut between 11,000 and 22,000 jobs globally this month. The rumored move targets the Xbox gaming division, Azure cloud teams, and global sales departments. This reduction represents 5% to 10% of the company’s total workforce.
Also learn about all the Xbox layoffs and affected studios in 2025!
Microsoft’s Restructuring Numbers
Reports from financial analysts indicate these cuts could hit during the third week of January 2026. While Microsoft has not officially confirmed the plan, the scale of the alleged layoffs surpasses the 15,000 jobs cut throughout 2025.
Internal sources suggest that despite solid revenue streams, the company is aggressively trimming middle management. The goal appears to be a flatter corporate structure. Departments viewed as “non-core” or overlapping are at the highest risk.
Microsoft is rumored to be preparing another round of layoffs for the fourth consecutive January, potentially cutting between 11,000 and 22,000 jobs to fund its AI initiatives. https://t.co/F6lyRO3zul
— Wccftech (@wccftech) January 7, 2026
AI Investments Drive the Cuts
The primary driver behind this decision is a massive pivot toward Artificial Intelligence. Microsoft’s capital expenditure for the first quarter of fiscal 2026 reached $34.9 billion alone. Total spending for the year is projected to exceed $80 billion.
To fund this expensive infrastructure—data centers, chips, and AI tools—Redmond is shifting resources away from payroll. Analysts believe the company is prioritizing long-term tech assets over maintaining its current headcount. Consequently, teams not directly tied to core AI research face budget tightening.
The Return-to-Office Strategy
Adding to the tension is a stricter Return-to-Office (RTO) policy starting February 23, 2026. Employees living within 50 miles of a hub must report onsite three days a week.
Many insiders view this mandate as a tactic to encourage voluntary resignations without severance packages. This “soft layoff” approach, combined with the projected cuts, suggests a turbulent Q1 for the tech giant.
Verdict: What This Means for Gamers
If these rumors hold true, the Xbox division could see significant operational changes. A reduction in staff often leads to project delays or a consolidation of services.
For the consumer, Microsoft’s need to recoup its $80 billion AI investment could eventually translate to higher prices for services like Game Pass or hardware.
Does Microsoft’s aggressive push into AI justify cutting thousands of human roles in gaming?
A video game enthusiast ever since I first got my hands on a Game Boy. Over the years, I've played many different games across various genres, discovering hidden gems and niche titles along the way. I'm also passionate about technology, always up-to-date with the latest news and insight in the PC and Console market. Ready to share and bring you the latest news !
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