Microsoft cuts 4,800 jobs in wider shake-up that hits Xbox

WASHINGTON: Microsoft said on Monday it will cut about 4,800 jobs, or roughly 2 per cent of its global workforce, in a cost-cutting move that includes a major restructuring of its Xbox gaming business.

The company said around 3,200 of those roles will come from its gaming division over the coming fiscal year. The overhaul also includes four game studios being separated from Xbox through spin-offs or sales, while a fifth studio has entered a review process that could end in a closure.

The latest reduction in headcount comes as Microsoft continues to spend heavily to compete in artificial intelligence, with technology companies pouring tens of billions of dollars into data centres and computing capacity geared for AI systems. In a memo to employees, Microsoft executive vice president Amy Coleman said the changes were tied to broader shifts in the industry.

“Our business is changing because the world around it is changing", Coleman wrote in the company-wide memo. She added “Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.”

Commercial and gaming divisions affected

Coleman said most of the layoffs were concentrated in Microsoft’s commercial business and Xbox. She said the jobs being removed were not being replaced by artificial intelligence, though she acknowledged that automation is changing the way work is carried out across the company.

On the commercial side, she said the cuts would build on Microsoft’s $2.5 billion initiative, announced last week, to place 6,000 engineers inside enterprise clients to speed up AI adoption among customers that have been slow to move.

At Xbox, chief executive Asha Sharma told staff in a separate memo that 1,600 jobs would be cut immediately, with the remaining reductions to take place through fiscal year 2027. Xbox has already gone through multiple rounds of job cuts since Microsoft completed its $68.7 billion purchase of Activision Blizzard in 2024 after a lengthy regulatory review focused on competition concerns.

Studios to be separated, reviewed or sold

Sharma described Xbox as a business under strain, saying its margins were significantly lower than those of competitors. She succeeded longtime Xbox head Phil Spencer, who retired in February, and has said she aims to return the division to growth by 2027.

“History is full of companies that mistake longevity for inevitability", Sharma wrote in her memo.

As part of the restructuring, Compulsion Games and Double Fine Productions will become independent and will keep their intellectual property and game catalogues. Ninja Theory and Undead Labs have entered arrangements to join new owners who will fund their current projects.

In France, Arkane’s management has started a required consultation with its Works Council to examine what Sharma called potential strategic options, a process that could lead to either a sale or further closures.