Microsoft announced on Monday that it is eliminating approximately 4,800 jobs, roughly 2% of its global workforce, as part of a cost-cutting move that includes a sweeping restructuring of its Xbox gaming division. The cuts, which span the coming fiscal year, represent the deepest overhaul in Xbox's history, with around 3,200 gaming positions affected.
The company said four game studios are being spun off or sold, and a fifth is under review 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 current projects. In France, Arkane's management is beginning a consultation with its works council to review potential strategic options.
Amy Coleman, Microsoft's executive vice-president and chief people officer, wrote in a memo to 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.' She noted that the layoffs fall mostly within Microsoft's commercial business and Xbox, and that eliminated roles are 'not being replaced by AI', though automation is reshaping work across the company.
On the commercial side, the cuts build on Microsoft's $2.5bn push to embed 6,000 engineers inside enterprise clients to accelerate AI adoption. At Xbox, CEO Asha Sharma told employees in a separate memo that 1,600 positions are being cut immediately, with the rest to follow through fiscal year 2027. She described Xbox's business as 'not healthy', with profit margins '3-10 times lower' than rivals. Sharma, who succeeded longtime Xbox chief Phil Spencer in February, pledged to return the division to growth by 2027.
The announcement is the latest in a string of mass layoffs by Microsoft as it invests heavily in artificial intelligence, with companies spending tens of billions of dollars on AI-ready datacenters and computing power. Xbox has faced successive rounds of cuts since Microsoft's $68.7bn acquisition of Activision Blizzard closed in 2024 after a lengthy regulatory review.
