The cuts are likely to affect more than 1,000 employees, according to a report by Business Insider on Monday.
The mixed reality division is responsible for development of products such as the HoloLens 2 headset. Microsoft says it will continue to support HoloLens 2 despite the cuts, including a programme with the US Department of Defense which uses a modified version of the headset.
In the Azure division, the team responsible for Azure for Operators and Mission Engineering, which aims to help customers achieve a competitive advantage, will likely see cuts, with an unnamed source telling Business Insider that up to 1,500 roles could be affected.
This comes at a time when Azure continues to report high rates of growth, with the UK Competition and Markets Authority (CMA) saying recently that AWS and Microsoft effectively operate a cloud duopoly in the country.
One driver for its continued growth is generative AI, which the company is integrating into Azure, Bing and M365 in the form of co-pilots, search aids and add-ons.
The latest layoffs are part of a series of redundancies at US tech companies since 2022, which have come even as their fortunes and profitability have risen.
2023 saw series of job cuts at Microsoft, including more than 10,000 (around 5% of the workforce) in January of that year, mostly in including customer and partner solutions, engineering, and consulting. In 2024, after its acquisition of gaming company Activision Blizzard, the company shed 1,900 jobs.
Other large tech companies, including Amazon, Google and Salesforce, have also announce layoffs this year as they restructure around AI.