Microsoft cuts 4,800 jobs as Sanders criticizes tax cuts
Microsoft Corp. is reducing its workforce by 4,800 employees, or 2.1%, to prioritize AI investments and restructure its Xbox division, which faces a hardware crisis. Sen. Bernie Sanders criticized the company for laying off 3,200 Xbox employees and raising console prices by $150 despite recording $101 billion in profits and receiving a $12.5 billion tax break. The stock remains under pressure, trading near key support levels as investors await quarterly earnings.
*this image is generated using AI for illustrative purposes only.
Microsoft Corp. is cutting approximately 4,800 jobs, representing about 2.1% of its global workforce, as it prioritizes massive investments in artificial intelligence infrastructure and executes a strategic reset of its Xbox division. The layoffs, announced at the start of the new fiscal year, primarily impact sales, consultancy, and Xbox gaming units. The stock fell to $383.48, reflecting investor concerns that heavy capital expenditures on AI will squeeze profit margins despite the company's robust operating margins of 46.3% in the third quarter. Sen. Bernie Sanders (I-Vt.) argued that the recent layoffs and Xbox price increases undermine claims that large corporate tax cuts ultimately benefit American workers.
Strategic Realignment and AI Focus
The workforce reduction follows Microsoft's record investment in AI, including the construction of enormous data centers and the expansion of cloud capacity. Amy Coleman, EVP and Chief People Officer at Microsoft, stated that the company is investigating how to reduce the need for job eliminations. The cuts follow a voluntary retirement buyout program offered in April to approximately 8,750 eligible U.S. employees. Microsoft clarified that the roles were "not being replaced by AI," though the technology is reshaping workflows. The company is absorbing a staggering $190 billion annual capital expenditure driven by AI technology, necessitating reductions in non-core areas to protect its bottom line.
Sanders Criticizes Microsoft Over Tax Break, Layoffs and Xbox Price Hike
Sanders renewed his criticism of corporate tax breaks, pointing to Microsoft after the tech giant announced about 3,200 job cuts and raised the price of its Xbox consoles. The Xbox division will account for roughly 3,200 of those cuts, with 1,600 employees affected immediately and the remaining 1,600 reductions planned over the next year. In a post on X, Sanders wrote, "Last year, Microsoft made $101 billion in profits, got a $12.5 billion tax break from Trump & paid its CEO $96 million." He contrasted those figures with Microsoft's recent moves, adding, "This year, it's raising the price of an Xbox by $150 & eliminating 3,200 jobs." Sanders concluded with a broader criticism of corporate tax policy, saying, "Please don't tell me corporate tax breaks create jobs. It never trickles down."
Xbox Business Reset
The gaming division is undergoing a significant correction as it faces the "most severe hardware crisis in its history." Xbox Chief Executive Asha Sharma stated the business is "not healthy," citing margins that are "3-10x lower" than comparable platform and publishing businesses. Hardware sales fell 33% last quarter. Consequently, Xbox will offload four gaming studios and reduce headcount across units including Activision, Blizzard, and Mojang. Sharma emphasized that the changes are about a "bigger future for Xbox," prioritizing growth and potential future hiring.
Technical and Market Outlook
Microsoft is trading near the 50% Fibonacci retracement level at $384.11, a key support zone. The stock recently bounced from a 52-week low of $349.20 but remains under pressure, having dropped nearly 19% over the last six months. Technical indicators suggest bearish momentum, with the MACD remaining below the zero line and a potential head-and-shoulders pattern forming on the weekly chart. A weekly close above $450 is needed to invalidate the bearish setup. Microsoft shares closed down 0.96% at $386.74 on Monday and rose 1.40% to $392.16 in Tuesday’s premarket trading.
| Metric | Value |
|---|---|
| Current Price | $383.48 |
| 52-week Low | $349.20 |
| Fibonacci Retracement (50%) | $384.11 |
| Fibonacci Retracement (38.2%) | $343.94 |
| Q3 Operating Margin | 46.3% |
Wall Street anticipates quarterly results on July 29, with earnings projected at $4.23 per share on revenue of $87.61 billion. Analysts maintain a consensus Buy rating with an average price target of $559.40. Investors will focus on whether Azure can sustain growth rates of 39% to 40% to justify the heavy capital outlays and if gross margins can hold steady against rising data center costs.
Will the upcoming earnings report on July 29 provide enough evidence of Azure growth to justify the current $190 billion annual capital expenditure?
How will the offloading of four gaming studios and the strategic reset impact Xbox's long-term competitiveness against Sony and Nintendo?
Can Microsoft sustain its 46.3% operating margins if data center costs continue to rise alongside AI infrastructure investments?
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