Microsoft shed roughly 4,000 U.S. jobs over the past fiscal year, dropping from 125,000 to 121,000 employees in what the Puget Sound Business Journal reported is the company's first-ever annual headcount decline.

For Bellevue, where Microsoft's Eastside presence anchors thousands of office workers, the cuts add pressure to a commercial market already contending with elevated vacancy rates.

The numbers come from Microsoft's annual Form 10-K for fiscal year 2026, which ended June 30.

Globally, the company's workforce fell from 228,000 to 223,000. CFO Amy Hood confirmed the 2% year-over-year decline on the company's Wednesday, July 29 earnings call.

Washington took a disproportionate hit

The PSBJ reported that Washington state workers bore the brunt of the reductions.

Microsoft President Brad Smith told The Seattle Times in early July, when the company announced 605 Washington layoffs as part of 4,800 global cuts, that the state headcount stood at roughly 52,000. "We're acutely sensitive to the important role that Microsoft plays in the region," Smith said at the time.

As we reported July 9, downtown Bellevue's office vacancy stood at 23.2% in the second quarter, even after the Pokémon Company's 369,800-square-foot lease at The Eight tower helped push the rate down.

Across the broader Seattle-Eastside market, vacancy remains at 23.9%, according to JLL data reported by GeekWire on July 17.

The headcount decline comes as Microsoft posted record revenue of $331 billion for fiscal year 2026, up 18%. Azure cloud revenue alone surpassed $100 billion for the first time, growing 41%. CEO Satya Nadella called it "a very strong close to what was a record fiscal year for us" on the July 29 earnings call.

What it means for Bellevue

Microsoft's 52,000 Washington employees fill office towers in Redmond, Bellevue, and Issaquah. Downtown Bellevue office buildings have already lost 19% of their assessed value, as we reported in July.

AI-company leasing offers a partial counterweight. AI tenants now occupy 855,000 square feet regionally, double their 2024 footprint, and accounted for 21.6% of leasing activity so far this year, according to JLL. But those firms have not yet matched the scale of what Microsoft is vacating.

Microsoft's next annual filing, due around July 2027, will show whether the decline deepens or stabilizes.