Microsoft announced on Monday that it is eliminating approximately 4,800 jobs, or roughly 2% of its global workforce, in a cost-cutting move that includes a sweeping restructuring of its Xbox gaming division. The cuts represent the deepest overhaul in Xbox's history, with about 3,200 gaming jobs to be shed over the coming fiscal year.
Restructuring Details and Studio Changes
As part of the restructuring, four game studios are being spun off or sold, and a fifth is entering a review process that could lead to closure. Compulsion Games and Double Fine Productions will become independent, retaining their intellectual property and game catalogs. Ninja Theory and Undead Labs have entered terms to join new owners with funding to continue their current projects. In France, Arkane's management is beginning a consultation with its works council to review potential strategic options, which could result in further closures or a sale.
Reasons Behind the Layoffs
Amy Coleman, Microsoft's executive vice-president and chief people officer, wrote in a memo to all employees: "Our business is changing because the world around it is changing. Companies don't get to choose whether their industry changes; they only get to choose whether they change with it." Coleman said the layoffs fell mostly within Microsoft's commercial business and Xbox. She noted that the eliminated roles were "not being replaced by AI," but acknowledged that automation was reshaping how work is done across the company.
On the commercial side, the cuts build on Microsoft's $2.5 billion push, announced last week, to embed 6,000 engineers inside enterprise clients to accelerate AI adoption by often reluctant customers.
Xbox's Financial Struggles
At Xbox, CEO Asha Sharma told employees in a separate memo that 1,600 positions were being cut immediately, with the rest to follow through fiscal year 2027. Xbox has been through successive rounds of cuts since Microsoft's $68.7 billion acquisition of Activision Blizzard closed in 2024 after a long regulatory review. Sharma described Xbox's business as "not healthy," with profit margins "3-10 times lower" than rivals. She succeeded longtime Xbox chief Phil Spencer, who retired in February, and has pledged to return the division to growth by 2027. "History is full of companies that mistake longevity for inevitability," she wrote. "We will not be one of them."
