Microsoft Corp. (MSFT  ) is reportedly preparing to announce another round of layoffs next week, with thousands of employees across sales, consulting and its Xbox gaming business expected to be affected. Microsoft Reportedly Preparing Smaller Layoffs Than Last Year

Microsoft is planning workforce reductions expected to affect thousands of employees, though the cuts are projected to be smaller than those announced last year, Business Insider reported on Tuesday, citing people familiar with the matter.

The layoffs are likely to affect less than 2.5% of Microsoft's roughly 220,000-person global workforce. The company could announce the reductions as early as next week, though the timing may change.

Some employees whose roles are eliminated could be offered other positions within the company immediately, according to one of the people cited in the report.

The expected layoffs are said to primarily target sales, consulting and Microsoft's Xbox gaming division.

Microsoft did not immediately respond to Benzinga's request for comments.

AI Investment And Cost Controls Drive Workforce Changes

The latest workforce reduction comes as Microsoft continues to increase spending on AI infrastructure and services while looking for ways to control operating costs.

Earlier this year, Microsoft introduced a voluntary retirement program for eligible U.S. employees with long service histories. Approximately 9,000 employees qualified for the program, representing about 7% of the company's U.S. workforce, the report said.

Roughly one-third of eligible employees accepted the buyout offer, reducing the need for deeper layoffs compared with last year, according to one person familiar with the matter.

Layoffs Surge As AI Infrastructure Investments Accelerate

The tech industry has seen a sharp rise in layoffs as companies ramp up spending on AI infrastructure, with more than 81,000 jobs eliminated during the first quarter of 2026.

Several technology companies have linked recent workforce reductions to their growing adoption of AI.

In May, Cloudflare Inc. (NET  ) said its decision to cut 20% of its workforce was driven in part by increased use of AI tools, while Cisco Systems Inc. (CSCO  ) said AI-related changes factored into its plan to eliminate about 4,000 jobs.

During the same month, Meta Platforms, Inc. (META  ) laid off about 8,000 employees, or roughly 10% of its workforce. The company has also scrapped plans to fill approximately 6,000 open positions.

Coinbase Global Inc. (COIN  ) and Block Inc. (XYZ  ) have also announced sizable layoffs as they expand the use of AI across their businesses.

However, not everyone believes AI is already the primary driver of widespread job cuts. In May, Nvidia Corp. (NVDA  ) CEO Jensen Huang criticized executives who attribute layoffs to AI.

Huang described such explanations as "lazy" and argued that companies have not yet deployed AI at a scale that would justify replacing large segments of their workforce.

Price Action: Microsoft Corp. shares closed 1.21% higher at $373.02 on Tuesday and gained an additional 0.68% to $375.55 in after-hours trading, according to Benzinga Pro.

According to Benzinga Edge Rankings, Microsoft ranks in the 90th percentile for Quality, although its shares have delivered negative returns across the short, medium and long-term time frames.