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Microsoft announced on Monday that it will lay off approximately 4,800 employees worldwide, representing about 2% of its global workforce. This move is part of a significant restructuring effort focused on revitalizing its underperforming Xbox gaming division.
The overhaul includes the largest scale layoffs in Xbox’s history, with roughly 3,200 gaming jobs expected to be eliminated over the next fiscal year. Additionally, four game studios will either be spun off or sold, and a fifth studio is under review for potential closure.
This announcement follows a series of broad layoffs by the tech giant, which is investing heavily in artificial intelligence. The company’s financial commitments include billions of dollars funneled into AI-capable data centers and computing infrastructure.
Amy Coleman, Microsoft’s Executive Vice President, explained in an internal memo that their business must evolve alongside the changing world. She emphasized that companies can’t control industry shifts but can choose how to adapt.
Most of the layoffs will impact Microsoft’s commercial operations and Xbox sectors. Coleman also clarified that these job cuts are not being replaced by AI, but automation is nonetheless transforming work processes across the organization.
On the enterprise front, the company is expanding on a recent $2.5 billion initiative that aims to embed 6,000 engineers inside client firms to promote AI adoption, especially among hesitant customers.
At Xbox, CEO Asha Sharma informed staff that 1,600 positions are to be cut immediately, with remaining reductions scheduled through 2027. The division has faced multiple layoffs since Microsoft’s $68.7 billion acquisition of Activision Blizzard finalized in 2024, following regulatory concerns over competitive practices.
Sharma described Xbox’s financial health as “not healthy,” noting that profit margins are “3 to 10 times lower” than those of competitors. She took over from longtime head Phil Spencer, who retired in February, and has committed to returning Xbox to growth by 2027.
As part of the restructuring, four studios will depart the division. Compulsion Games and Double Fine Productions will operate independently, keeping their intellectual properties and game catalogs. Meanwhile, Ninja Theory and Undead Labs are in agreements to transition under new ownerships with funding to continue their current projects.
In France, Arkane’s management has begun consultations with its Works Council regarding “potential strategic options,” which might include closures or a sale.
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