Microsoft has announced it will cut approximately 4,800 jobs worldwide, representing about 2.1% of its global workforce. Australian employees of Microsoft, which employs around 3,000 staff across six offices in the country, are expected to be affected, though specific divisions or locations impacted locally have not been disclosed.

The job cuts come as part of Microsoft's efforts to manage workforce size to fund its significant investments in artificial intelligence (AI). Despite these reductions, Microsoft stated that the roles eliminated are not being replaced by AI. The company is under pressure to demonstrate returns on historic AI investments, which are expected to exceed $1 trillion across Big Tech this year.

In addition to workforce changes, Microsoft is restructuring its Xbox division. Xbox's new head, Asha Sharma, announced in a note to employees that four studios will be divested. "South of Midnight" producer Compulsion Games and "Psychonauts" maker Double Fine Productions will become independent studios. Meanwhile, Ninja Theory and Undead Labs will be spun off to focus on growing the "Senua" and "State of Decay 3" franchises, respectively.

Earlier this year in Australia, other tech companies such as Atlassian and WiseTech Global also announced job cuts linked to AI-driven automation.

Microsoft is expected to report its financial results later this month. In April, it forecasted quarterly Azure sales exceeding Wall Street estimates but also projected a $US190 billion spending budget for 2026, surpassing expectations.

Notable Quotes

  • "The roles eliminated today are not being replaced by AI."
  • "South of Midnight producer Compulsion Games and Psychonauts maker Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will be spun off to grow Senua and State of Decay 3," said Asha Sharma.
  • "That [targeted cuts] makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock."
  • "In the near term, the market is likely to reward Microsoft less for headcount reductions and more for evidence that AI monetisation is scaling faster than AI-related costs."
  • "Microsoft has been managing down its workforce in order to pay for its AI investments."