Microsoft lays off thousands in latest cuts to state's tech industry

There was more bad news for the tech sector Wednesday as Microsoft announced reductions to staff, preparing for thousands of layoffs worldwide, including in its gaming division.

The cuts add to what has become a wave of job reductions across California’s technology industry. Tech companies in the state announced 17,874 cuts during the first quarter as businesses continue to prioritize efficiency and redirect resources toward artificial-intelligence investments.

Microsoft announced it will lay off thousands of employees globally, including staff in its gaming and Xbox divisions. The cuts affect less than 4% of the company’s roughly 228,000-person workforce.

“We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace,” a Microsoft spokesperson said.

In a memo to employees Wednesday morning, Microsoft gaming chief Phil Spencer acknowledged the difficult timing of the layoffs.

“To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas,” Spencer wrote in the memo.

The latest layoffs reflects broader industry shifts beyond the pandemic-era over-hiring that initially drove workforce reductions. Companies are now scrutinizing employee productivity more intensively while reallocating capital toward AI development. Economic uncertainty stemming from regulatory changes and immigration policy shifts is also prompting businesses to reduce expenses.

Major San Francisco Bay Area technology companies including Meta, Google and Workday have reduced staff this year.

These workforce reductions represent a significant blow to California, as the technology sector underpins the state’s economy. The industry supports high-paying positions and generates substantial tax revenue through stock options and capital gains when employees sell their shares.

Spencer emphasized that the decision came from shifting strategic priorities, stating that the layoffs are “not a reflection of the talent, creativity, and dedication of the people involved.”

Microsoft is providing severance benefits aligned with local laws, including pay, healthcare coverage and job placement resources. Affected employees will receive priority consideration for open positions within Microsoft Gaming, the company said.