Microsoft announced on Monday that it is eliminating approximately 4,800 jobs, roughly 2% of its global workforce, as part of a sweeping restructuring of its Xbox gaming division.
The cost-cutting move will shed about 3,200 gaming roles over the coming fiscal year, according to a report from The Guardian.
The corporate realignment includes spinning off or selling four game studios, while a fifth studio enters a strategic review that could lead to closure.
Restructuring Details
Company executives stated the layoffs follow massive spending on artificial intelligence, including tens of billions of dollars channeled into AI-ready datacenters.
Commercial operations are also heavily impacted, with cuts building on a $2.5 billion initiative to embed 6,000 engineers inside enterprise client organizations to accelerate AI adoption.
Microsoft Executive Vice President and Chief People Officer Amy Coleman addressed staff in an internal memo, saying, "Our business is changing because the world around it is changing."
Coleman noted that workforce reductions fell primarily within commercial business sectors and the Xbox division.
"Companies don't get to choose whether their industry changes; they only get to choose whether they change with it," Coleman wrote.
She clarified that while automation continues to reshape operations, the eliminated positions are not being directly replaced by AI technology.
Leadership changes at the gaming division preceded the restructuring, following job cuts after Microsoft completed its $68.7 billion acquisition of Activision Blizzard in 2024.
Xbox Chief Executive Officer Asha Sharma informed employees in a separate memo that 1,600 positions would be eliminated immediately, with the remaining cuts scheduled through fiscal year 2027.
"History is full of companies that mistake longevity for inevitability," Sharma wrote, describing the current business as unhealthy with profit margins three to ten times lower than market rivals.
"We will not be one of them," she added.
The restructuring directly impacts several game development studios under the Xbox umbrella.
Compulsion Games and Double Fine Productions will transition to independent status, maintaining full ownership of their intellectual property and game catalogs.
Ninja Theory and Undead Labs have finalized terms to join new corporate owners, securing funding for active development projects.
In France, Arkane management has initiated a mandatory consultation process with its works council to evaluate strategic options that could lead to a sale or closure.
