AI Cuts Triggered Over 120,000 Job Losses in Nine Months

AI was cited in more than 120,000 job cuts in the first nine months of 2026, making it the leading cause of layoffs this year, according to outplacement and executive coaching firm Challenger, Gray & Christmas. Those dismissals represent about 21% of all layoffs, and the cuts have been concentrated largely in the technology sector, says Andy Challenger, the firm's chief revenue officer.

"Because its products and investments are in building artificial intelligence itself, they're just way more affected by investments in AI," Challenger says. "We may very well see jobs being replaced by artificial intelligence in all these other sectors as it becomes easier to use, and it can really be deployed in ways that replace people's jobs."

For most employers, job cuts remain a last resort, Challenger contends. Organizations typically trim their human capital budgets in smaller ways first, and those quieter cuts could signal layoffs ahead.

"When we see a cooling labor market—like we've been seeing the last couple years—we tend to see companies slow down hiring, raises, and benefits, and then finally get to layoffs," he says. "That would be expected if companies are trying to cut costs to reinvest more capital into artificial intelligence."

Where is the AI money coming from?

In a survey of 866 U.S. business leaders by Resumebuilder.com, 54% said their companies have cut or will cut employee compensation this year and reallocate those funds toward AI spending. The most popular budget items being redirected into AI:

• Bonuses
• Equity or stock options
• Raises
• Benefits
• Base salaries

Workers are already losing ground in real terms. According to the latest Bureau of Labor Statistics report, hourly wages are up 3% this year, but inflation increased 3.4%—a net loss in earnings.

"There's a lot of talk about AI replacing jobs out there. But our survey is showing the other ways that employers are looking at increasing those investments, and they're reducing employee compensation in some way to fund it," says Stacie Haller, Resumebuilder.com's chief career adviser. "Employees need to understand that it's not just the loss of a job that might be affecting them."

Haller says business leaders face immense pressure to stay current with the latest AI developments, and the funds must come from somewhere. She urges leaders to stay honest with staff as they make those decisions.

"They just want to understand what's happening in their company," Haller says. "For employers who are making these changes, just let your folks know what you're looking at, why it's important to the company, why you're taking these strategies, and what they should expect. Workers just want to know what's going on."

People-first or AI-first?

A study by benefits technology provider Businessolver shows companies splitting into two camps as they free up funds for AI. Among C-suite executives:

• 27% are cutting head count to fund AI
• Only 18% of those are also investing in upskilling staff
• More than a third of executives trying to avoid layoffs are also investing in workforce development

"If I believe that the majority of my workforce can be replaced by AI, then why would I invest in them?" says Marcy Klipfel, Businessolver's chief human resources officer. Organizations that see their strategic value in human expertise, she says, are far more likely to invest in attracting, retaining, and developing that talent.

Does governance drive the choice?

How an organization answers that question may depend on its governance structure. Klipfel points to quarterly pressure on listed companies.

"There's just a reality that public companies have to hit their numbers quarter over quarter, and that's just a different environment," she says. "It's part of being a public company and part of having shareholders."

That investor pressure can push public companies to cut staff and pour money into technology without upskilling the remaining workforce. The approach may hit quarterly targets, but Klipfel warns it creates longer-term problems.

"You can be making decisions that ultimately don't unleash the power of AI because you simply don't have humans behind it making sure that it is checking all the boxes," she says.

Moving resources away from people could also discourage remaining staff from embracing AI, weakening adoption efforts across the organization.

"If you're not respecting what humans bring to the table, that will come at the expense of AI efficiency," Klipfel says. "The data is overwhelming that companies who hit that empathetic sweet spot outperform across all success metrics."