Microsoft (MSFT) Is Rumored to Be Planning Thousands of Job Cuts as AI Spending Accelerates

Microsoft Corporation (MSFT) is rumored to be planning another round of job cuts in January 2026. Estimated guesses suggest between 11,000 and 22,000 roles could be removed worldwide. That would equal about 5% to 10% of its total workforce of roughly 220,000 employees.

The rumored cuts are expected to take place in the third week of January. Reports from workers point to Azure cloud teams, the Xbox gaming unit, and global sales as key areas of focus. So far, Microsoft has not confirmed the plan. This move would follow a difficult 2025. During that year, Microsoft cut more than 15,000 jobs across several rounds. Those actions came even as revenue and profit stayed strong.

AI Focus Drives Cost Shifts

At the same time, Microsoft is spending heavily on AI systems. In the first quarter of fiscal 2026 alone, capital spending reached $34.9 billion. The company expects total spending for the year to pass $80 billion, which would be higher than fiscal 2025.

Most of that money is going toward data centers, chips, and AI tools. Due to this shift, analysts believe Microsoft is moving funds away from payroll and into long-term tech assets. As a result, middle managers and older product teams may face a higher risk.

Meanwhile, roles tied to AI research and core cloud work are seen as more stable. This reflects the company’s goal to stay competitive in AI development.

^{Microsoft’s operating expenses remain relatively stable despite its aggressive AI buildout. Research and development spending trends higher over time, but the largest AI costs sit outside this chart in long term infrastructure investments. This supports the view that Microsoft is funding AI expansion by managing payroll and overhead rather than allowing operating costs to surge.}

Office Policy Adds More Pressure

In addition, Microsoft plans to enforce a stricter office policy starting February 23, 2026. Workers who live within 50 miles of an office will need to be on site at least three days per week. Some employees see this rule as a way to encourage exits without formal layoffs.

Earlier in 2025, Microsoft cut about 6,000 jobs in May and another 9,000 in July. These reductions happened despite nearly $75 billion in net income over recent quarters. Overall, the company appears focused on efficiency and AI growth rather than staff expansion.

Is Microsoft Stock a Buy, Hold, or Sell?

On the Street, Microsoft holds a Strong Buy consensus rating. The average MSFT stock price target is $632.22, implying a 33.70% upside from the current price.

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