80%
Probable
[UPDATE] Microsoft's Communications Lead Frank Shaw commented on the original rumor as being '100% made up/speculative/wrong'. Here's hoping there will be no layoffs, of course.
[ORIGINAL STORY] A new rumor suggests Microsoft is preparing to use its layoff axe once again, for the fourth consecutive January, cutting between 11 and 22 thousand jobs across various divisions (including Xbox) because of the rising costs of AI investment. If the figures were confirmed, it would be the biggest layoff round yet.
The rumor comes from TipRanks, which adds that the layoffs are expected to fall upon employees at some point in the third week of January. According to workers' anonymous sources, even the Azure cloud team could be affected.
Analyst projections had previously suggested that Microsoft may need to cut at least 10,000 employees annually just to offset increased capital depreciation costs from data center expansion. Looking back over the past few years, the current fourth-largest company in the world by market capitalization reduced its workforce by 5% in 2023, primarily as part of a resizing effort following the pandemic's mass hiring spree. That year in January, it started with 10,000 jobs lost, when the gaming teams affected were Bethesda, The Coalition (developers of Gears of War), and 343 Industries (developers of the Halo series).
In January 2024, gaming really took the brunt of the hit as Microsoft 'only' cut 1,900 employees, around 1% of its workforce. It happened just three months after the finalization of the acquisition of Activision Blizzard, which cost $75.4 billion when all was said and done. Activision Blizzard was indeed the most affected studio, with the new survival game franchise codenamed Odyssey canceled as a result, but other teams at Xbox and Bethesda also suffered cuts. The worst was yet to come for gaming, though: Arkane Austin (Prey, Redfall), Tango Gameworks (The Evil Within, Ghostwire: Tokyo, Hi-Fi Rush), Alpha Dog Games, and Roundhouse Studios were all abruptly shut down in May 2024. Later that year, around 1,000 employees were removed from the HoloLens and Azure cloud teams, and another 650 from corporate and support divisions, but it was still a relatively quiet year compared to the other two for Microsoft as a whole.
2025 was by far the worst, and it once again began with a January cut of slightly less than 1% of Microsoft's employees based on performance. That was just the start: 3% of the workforce was cut in May, and an even heavier blow landed in July, when Microsoft removed another 4% of its employees, shutting down The Initiative (and its Perfect Dark reboot project) and cutting a lot of employees at ZeniMax Online Studios (leading to the cancellation of Project Blackbird) and Rare (axing Everwild). Turn 10 Studios was hit hard, too, essentially becoming a support studio for the Forza Horizon franchise following a few unsuccessful Forza Motorsport releases.
Following that round, a report from the inside revealed that Microsoft was 'trying their damndest' to replace human jobs with AI agents. A couple of days later, another report mentioned that the layoff rounds were fundamentally needed to fund increased spending in AI infrastructure, and that seems to be the case even with the new round that might be announced soon.
The TipRanks report also reveals that Microsoft plans to enforce stricter office policies starting from February 23, 2026. Employees residing within 50 miles of an office will be required to work on-site for at least three days per week. Internally, some people view this new rule as a subtle way to encourage even more people to leave.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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