H-1B: Inside Microsoft Layoffs and the Foreign Visa Loophole

Microsoft has initiated another major workforce reduction, cutting nearly 4,800 employees as it begins its new financial year.

The move coincides with a continued surge in high‑skilled visa filings, raising questions about how the company is reshaping its labor force while publicly insisting roles "are not being replaced by AI." The cuts affect workers across commercial sales and Xbox, signaling broader structural changes that could accelerate Microsoft's shift toward AI‑focused global hiring.

The layoffs arrive just one year after Microsoft eliminated roughly 9,100 jobs and amid growing scrutiny of its H‑1B activity. Immigration experts say the overlap between domestic cuts and new visa filings is becoming a defining feature of the tech industry's restructuring cycle, with Microsoft among the top U.S. corporations requesting thousands of H‑1B positions annually.

A Microsoft spokesperson told Newsweek: “These decisions are based on business need, not visa status. H-1B employees were also impacted by job eliminations in the U.S.”

Sharma acknowledged the emotional and creative toll of the restructuring, telling employees the changes "will directly affect people who have poured their creativity into building Xbox." She said the division's business fundamentals had weakened, citing margins "3–10x lower" than those of comparable platform and publishing companies, a smaller install base entering the current console generation, and investments that failed to grow at the pace leadership expected.

The shake‑up extends beyond the four departing studios. Microsoft is weighing whether to sell or close Arkane Studios, whose Blade project has been delayed and is running over budget. Arkane's French leadership has begun formal consultations with its Works Council to evaluate strategic options, a process that could take months and leave the studio's future uncertain.

Other teams across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios will also see reductions. Bethesda Studios, in particular, is facing larger cuts. As part of the new structure, Mojang and King-two of Xbox's largest studios by monthly active players-will now report directly to Sharma.

The restructuring signals a shift away from the smaller studio acquisitions Microsoft pursued to bolster Xbox Game Pass. Instead, the company appears to be consolidating around major franchises and higher‑margin projects.

Sharma said Xbox must focus on "great technology that gets better when it gets simpler," outlining plans to flatten management layers, streamline platform teams, and reduce vendor spending by half.

What Is Microsoft’s Retirement Program?

Microsoft has introduced a voluntary retirement program for U.S. employees for the first time in its history, offering buyouts to workers whose age and years of service total 70 or more. The program applies to senior director level and below, covering roughly 7 percent of Microsoft's U.S. workforce, according to a person familiar with the plan. Eligible employees should have received full details on May 7, though those on sales‑incentive plans are ineligible to participate.

The company has not publicly disclosed the full benefit package, but leadership framed the program as a way to give long‑tenured employees "the choice to take that next step on their own terms.” The retirement option arrives as Microsoft ramps up spending on AI‑driven data‑center infrastructure and adjusts compensation structures, including changes to how managers award stock and a simplified review process.

The buyout program is emerging as a key tool for managing workforce transitions after multiple rounds of layoffs last year. As of June 2025, Microsoft employed 228,000 people globally, including 125,000 in the U.S., making even a 7 percent eligibility pool a significant shift in how the company handles long‑term staffing.

Microsoft said more than 30 percent of eligible employees opted into the voluntary retirement program, which the company views as part of its effort to "build high‑performing teams that operate with pace and agility."

How Many International Employees Does Microsoft Hire?

Microsoft's global workforce remains one of the largest in the tech industry, with 228,000 full‑time employees as of June 30, 2025. Of those, 125,000 work in the United States and 103,000 are based internationally, according to the company's FY2025 Form 10‑K. The geographic split has held steady for two years, marking the first prolonged headcount plateau since the post‑Nokia era.

The company's hiring patterns show how its international footprint is evolving. Operations roles-many tied to data center expansion and AI infrastructure-grew by 3,000 employees in fiscal 2025, while research and development, sales and marketing, and general administration each contracted by 1,000. Immigration attorneys say this shift mirrors Microsoft's broader strategy: domestic cuts in legacy areas paired with continued investment in global, AI‑adjacent talent pipelines.

Microsoft also remains one of the largest H‑1B sponsors in the country, filing thousands of Labor Condition Applications each year for specialized roles. While most petitions are extensions for existing employees, the company still ranks among the top U.S. employers for new high‑skilled visa hires. Experts say the combination of international growth, domestic restructuring, and sustained visa activity offers a clearer picture of how Microsoft is rebalancing its workforce in the AI era.

What Microsoft Execs Have Said About the Layoffs

Microsoft leadership has framed the cuts as part of a long‑term strategy to align the company with its "highest priorities and greatest areas of opportunity." Chief People Officer Amy Coleman stressed that the company is "constantly looking for ways to reduce the need for job eliminations" and highlighted redeployment efforts.

But external experts argue that Microsoft's public messaging does not fully address the tension between layoffs and visa filings. Immigration attorney Richard T. Herman told Newsweek that while companies can legally lay off workers and continue filing H‑1B LCAs, "it doesn't make the optics easy to defend."

Labor economists point to broader industry patterns: in 2022 and early 2023, the top 30 H‑1B employers hired more than 34,000 new H‑1B workers while laying off at least 85,000 employees. Microsoft, which hired over 1,000 new H‑1B workers in 2022, cut roughly 10,000 employees during that same period.

Microsoft has signaled that additional restructuring is likely, with Coleman telling employees that "there will be more changes ahead" as other parts of the business undergo similar realignment.

What Immigration Experts Say About the Visa Loophole

Immigration experts say Microsoft's restructuring reflects a broader pattern across the tech sector, where companies reduce domestic headcount while continuing to file large numbers of H‑1B LCAs for high‑skilled roles.

Ron Hira, an associate professor at Howard University who has testified before Congress on high‑skilled immigration, told Newsweek that Microsoft's behavior fits a long‑running trend: tech firms "continue to exploit the H‑1B visa program at a time of mass layoffs," a dynamic he and economist Daniel Costa documented in 2023.

Corporate immigration attorney David Adams of Cozen O'Connor said it is common for large employers to pursue visa sponsorship even as they reduce staff.

"Workforce reductions are rarely uniform across an organization," he said, noting that companies often cut roles in sales, operations, or legacy business lines while expanding hiring in areas like AI, cloud infrastructure, cybersecurity, and advanced engineering.

Adams emphasized that the key compliance question is whether eliminated roles and sponsored positions are "materially the same jobs," something he says requires a fact‑specific analysis. He added that observers should look at shifts in job titles, occupational classifications, wage levels, and geographic concentration to understand whether filings reflect a strategic talent pivot rather than simple headcount growth.

Immigration attorney Richard T. Herman said the legality of filing LCAs during layoffs does not resolve public concerns.

"A company can legally lay off workers and still file H‑1B LCAs, but it doesn't make the optics easy to defend," he told Newsweek.

Herman said AI‑focused filings often reveal where leadership is directing investment and talent, offering clues about deeper organizational changes rather than isolated hires.

Contact Newsweek editors on this story: Kate Nalepinski and Sam Wilson.

2026 NEWSWEEK DIGITAL LLC.

This story was originally published July 6, 2026 at 4:31 PM.