Microsoft is cutting 4,800 jobs worldwide and Australian staff are caught up in the cull

Microsoft is cutting about 4,800 jobs worldwide, roughly 2.1% of its global workforce, and Australian staff will be caught up in it, ABC News understands.

The company employs about 3,000 people in Australia across six offices. Which divisions or locations lose roles here isn't yet known.

The cuts land as the biggest names in tech pour money into artificial intelligence. Big Tech's AI spending is set to top $1 trillion this year, and the pressure to show a return on it is now falling on headcount. Amazon and Meta have each laid off thousands of staff globally this year, and closer to home Atlassian said nearly 500 local jobs would go while WiseTech Global flagged about 2,000 cuts as AI took over manual software coding.

What Microsoft is really saying, and the word it's leaning on

Microsoft insists these jobs aren't being replaced by AI. Its actual words were narrower. The roles cut "today" aren't being replaced by AI, the company said, and that qualifier is the whole story.

The company is spending $190 billion this year building AI. Its own executives admit AI "is changing how work gets done". It's paying another $2.5 billion to plant 6,000 engineers inside other businesses to get them using AI faster. The product Microsoft is spending all this money to build is software that does tasks people used to be paid to do.

We can't tell you Microsoft will one day replace these workers with AI, because Microsoft hasn't said that and won't. What we can tell you is it's already happening elsewhere. WiseTech Global cut about 2,000 jobs as AI took over manual coding. Seven is shedding staff as its own AI writes the news. Those weren't people cut to fund AI. Their work is the work the AI now does.

So the plain version is this. This round is mostly Microsoft trimming staff to afford the AI build, and it insists the machines aren't taking these particular jobs. The word doing the heavy lifting is "today".

Amy Coleman says AI isn't taking these jobs, but it's changing how the work gets done

Microsoft's chief people officer, Amy Coleman, told staff in a memo:

"The roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done. Companies don't get to choose whether their industry changes, they only get to choose whether they change with it."

Coleman said the cuts fell mostly in Microsoft's commercial business and its Xbox arm, and she framed the decision bluntly.

On the commercial side, the layoffs build on a $2.5 billion push Microsoft announced last week to embed 6,000 engineers inside enterprise clients and speed up AI adoption among reluctant customers.

Asha Sharma calls Xbox "not healthy" as it loses 3,200 roles and four studios

The deepest cuts hit gaming. Microsoft is shedding about 3,200 Xbox jobs over the coming financial year, with 1,600 people laid off immediately on Monday, US time.

Xbox's chief, Asha Sharma, told staff the division's business was "not healthy", with profit margins "3 to 10 times lower" than its rivals. She's pledged to return Xbox to growth by 2027. Sharma took over from longtime Xbox boss Phil Spencer, who retired in February.

"History is full of companies that mistake longevity for inevitability," she wrote. "We will not be one of them."

Four studios are leaving Xbox. Compulsion Games, maker of South of Midnight, and Double Fine Productions, maker of Psychonauts, will become independent and keep their intellectual property and game catalogues. Ninja Theory and Undead Labs are being spun off to new owners with funding to keep working on Senua and State of Decay 3.

In France, the management of Arkane Studios, which made Dishonored and is working on a game based on the Marvel character Blade, has begun a required consultation with its works council over what Sharma called "potential strategic options", a process that could end in a sale or closure.

The overhaul comes despite the tens of billions Microsoft has spent building Xbox, including the $68.7 billion Activision Blizzard takeover that closed in 2024 after a long regulatory review. Microsoft still trails Sony's PlayStation and Nintendo, and has shifted toward putting its games on more platforms rather than relying on console exclusives to drive hardware sales.

Analysts say the cuts are about paying for AI, not a fresh crisis

Analysts read the move as discipline rather than alarm.

"That makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock," said Parth Talsania, chief executive of Equisights Research. "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," said Gil Luria, managing director at DA Davidson. "By keeping its headcount down they have been able to accelerate revenue growth while maintaining the same margins."

The maths behind it is steep. Microsoft's Azure cloud business is booming on AI demand, but in April the company forecast $190 billion in spending for 2026, well beyond what Wall Street expected, and the cost of building data centres to run those services is squeezing its cash. A surge in memory chip prices, driven by the same data centre demand, has even forced Microsoft to raise Xbox console prices while demand for the console was already soft.

Microsoft earlier this year offered voluntary buyouts to about 9,000 US staff, around 7% of that workforce, and it often trims jobs near the end of its June financial year as it sets spending plans for the year ahead. It's due to report results later this month.

For now, the company says the roles going aren't being handed to machines. Its 3,000 Australian staff are still waiting to hear how many of those roles are theirs. The same AI squeeze has already reached Australian newsrooms and software firms this year.