Microsoft Offers Buyouts to 60,000 Employees as AI Spending Reshapes Headcount

Microsoft is offering voluntary buyouts to roughly 60,000 employees across the US, UK, Canada and India — the largest exit offer in the company's history, and the clearest signal yet that AI spending is shrinking its workforce.

It's the first time Microsoft has presented such an offer at this scale, expanding on a retirement package limited to around 9,000 employees earlier this year. The goal is blunt: keep AI infrastructure investment flowing by cutting operating costs and headcount.

CEO Satya Nadella spelled out the math nearly two years ago on a podcast. "Our total people costs will go down, our cost per head will go up, and my GPU per researcher will go up," he said. Fewer people. Higher salaries. More compute for those who stay.

What do the numbers show?

Microsoft now employs about 223,000 people as of June 30 — 5,000 fewer than the 228,000 it employed in 2025. It's the first year-over-year headcount decline in a decade. The company laid off 4 percent of its workforce in July last year, then cut another 4,800 employees months ago, hitting Xbox and commercial sales teams hardest. The new Voluntary Exit Offer reaches about a quarter of the workforce.

More than 30 percent of the 9,000 eligible employees took the earlier retirement offer. Take-up will likely be lower this time, because the terms — cash based on tenure, accelerated stock vesting, subsidized health coverage and several months of career services — reportedly match regular severance. Even a 5 percent acceptance rate means 3,000 departures. Eligible employees have until December to decide, and rumors point to more layoffs in November and January.

Some insiders welcome the cuts. "Microsoft needs fewer people," says Merill Fernando, a former Microsoft Entra product manager. "Lots of small orgs. Layers on layers. Silos everywhere." Nadella himself addressed Microsoft's org-chart meme on a podcast with Stripe co-founder John Collison last year: "Social cohesion is not a goal, winning in the marketplace is a goal."

What's happening at Xbox?

Dan Greenawalt, the creative force behind Forza Motorsport, is retiring after nearly 27 years. Turn 10 Studios has merged with Playground Games, which now runs two locations in Leamington Spa and Redmond. Turn 10 lost more than 70 people to layoffs last year — the vast majority of the studio — and remaining staff have moved onto Forza Horizon and Fable. A Forza Motorsport return now looks uncertain.

Xbox's first COO, Helen Chiang, is also out after just months in the role and 21 years at Microsoft. Eurogamer reported she was "terminated for policy violations"; Xbox chief Asha Sharma's memo said only, "I'm grateful for her years of service and wish her well."

Bethesda news landed too: sources say the next mainline game will be officially titled The Elder Scrolls VI: Sentinel, with an announcement possible next month — 15 years after Skyrim. Sentinel is reportedly set in Hammerfell. Xbox CEO Asha Sharma saw a live playthrough in August and said "the story is even greater."

What about the money?

Microsoft overhauled its financial reporting this quarter, separating Windows, Surface and Xbox from its AI and cloud business. Windows OEM revenue fell 22 percent amid a RAM shortage that dropped the PC market 20 percent. Azure delivered $33.17 billion of Microsoft's $92.3 billion total — a full third of revenue. "Our goal is to advance the cost to outcome frontier," Nadella said on the earnings call, promising capabilities "within three to six months" of leading models at a fraction of the training cost.

Kotaku reports Gears of War: E-Day cost over $500 million to make, excluding marketing; one source says more than 400,000 copies have sold across Xbox and Steam. Meanwhile, Microsoft has a mid-November cutoff — extended by a month — to decide the fate of Arkane Lyon and its Blade game, amid ongoing sale talks with multiple publishers.

What else moved this week?

• Former GitHub CEO Thomas Dohmke launched Entire, an AI-agent-focused code platform that replaces pull requests with "Trails" — one GitHub employee admits, "they have ambushed us up and down the stack on our own conference week."
• Microsoft says an AI tool diagnosed conditions up to four times more accurately than doctors in a Science-published study. "It needs clinical validation," Microsoft AI CEO Mustafa Suleyman cautioned. "This is a major milestone along that journey."
• Enclave researchers found a Microsoft Authenticator flaw letting zero-permission Android apps steal tokens; Microsoft has patched it, and users should update immediately.
• Denmark abandoned its open-source Office trial after formatting and tracking-change problems; Copilot on smart TVs gets discontinued during 2026.
• Windows 11 gains an in-taskbar internet speed test and faster trackpad scrolling, while a Surface Laptop Ultra firmware update fixes flickering and reboot bugs.

Whether Nadella can reshape Microsoft for the AI era without breaking the empathy-first culture he built may define his legacy — and the December buyout deadline will set the numbers for the next round of cuts.