Key Points
- Microsoft will eliminate 4,800 jobs company-wide, representing about 2.1 percent of its workforce, as part of a broader restructuring tied to changing business priorities and AI investments.
- Xbox will bear the brunt of the cuts, with approximately 3,200 positions to be eliminated through fiscal 2027, including 1,600 immediate layoffs.
- In a candid note on Monday, Xbox CEO Asha Sharma said its business was not healthy.
Microsoft is cutting approximately 4,800 jobs across the company, including a sweeping restructuring of its Xbox gaming division that will eliminate roughly one-fifth of the unit’s workforce as the software giant seeks to improve profitability amid economic turbulence over artificial intelligence (AI) that has slowed some of its gaming and consumer computer divisions.
The layoffs represent about 2.1 percent of Microsoft’s global workforce. Xbox accounts for the largest share of the reductions, with Chief Executive Officer Asha Sharma informing employees that approximately 3,200 positions will be eliminated through fiscal year 2027, including 1,600 immediate job cuts announced Monday.
Shares of Microsoft were down more than 1 percent in mid-market trading on Monday.
Stock Price
In a memo to employees, Sharma described the move as “the most significant restructure in Xbox history,” saying the gaming business has failed to deliver the financial returns the company expected despite years of acquisitions and investment.
“Our business today is not healthy,” Sharma wrote. “We are operating at margins that are three to 10 times lower than comparable platform and publishing businesses.” She added that investments in Xbox Game Pass, multi-platform publishing and expanding Xbox’s content portfolio “did not grow at the pace we expected,” while the industry now faces “the most severe hardware crisis in its history.”
As part of the restructuring, Microsoft will return Compulsion Games and Double Fine Productions to independent ownership, while Ninja Theory and Undead Labs are expected to move to new owners. Arkane Studios is also exploring strategic alternatives through a consultation process in France. Microsoft said none of its publicly announced first-party games or projects will be canceled because of the restructuring.
The company is also reshaping Xbox’s organizational structure by dramatically reducing management layers. Sharma said some areas currently have as many as 14 layers of management, which has slowed decision-making and increased complexity. Microsoft plans to reduce that to no more than five layers, and ideally three, while consolidating operations under a new Chief Operating Officer role. Helen Chiang has been promoted to the position and will oversee profit-and-loss responsibility across Xbox’s content, hardware, platform and services businesses.
Separately, Microsoft’s Chief People Officer Amy Coleman told employees the broader layoffs are intended to better align the company’s workforce with rapidly changing technology and customer demands.
Coleman emphasized that the eliminated positions are “not being replaced by AI,” while acknowledging artificial intelligence is fundamentally changing how work is performed and requiring employees to develop new skills. She also said Microsoft has redeployed more than 4,000 employees into new roles over the past year and continues to explore alternatives to involuntary layoffs, including voluntary separation programs.
The restructuring and planned layoffs come less than a week after Microsoft rolled out new prices across the enterprise and government versions of its Microsoft 365 cloud office solution, with costs adjusted from $5 to $22 per month, depending on the solution used.
Microsoft also announced a second wave of price increases for its Xbox gaming consoles last month, with the cost of the consoles rising from $20 to $70 on August 1. The move comes less than a year after Microsoft hiked prices on its consoles to address an ongoing component shortage caused by significant demand from artificial intelligence developers and data centers.
The company said it would offset the price increases by making it easier for consumers to pay for consoles through “buy now, pay later” installation programs when the devices are bought through the Microsoft Store. Some partners are also offering interest-free financing on Xbox consoles, and Microsoft is “working with retail partners on new programs” to provide refurbished consoles at lower prices.
