Microsoft announced on Monday a 20 percent reduction in its Xbox video game division workforce, along with the closure of several game studios.
The technology giant is immediately laying off 1,600 workers, with an additional 1,250 roles set to be eliminated over the next year.
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According to a report by the New York Times, these Xbox layoffs are part of a broader 4,800-person job cut at Microsoft, affecting approximately 2 percent of the company's total workforce.
The downsizing follows a shift in corporate priorities, as Microsoft directs tens of billions of dollars toward artificial intelligence infrastructure.
Company executives acknowledged miscalculating the economic difficulties currently affecting the broader video game sector.
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"Our platform teams are 40 percent larger than they were at the start of this generation, even as our player base and playtime have declined," wrote Asha Sharma, Xbox's chief executive, in a letter to employees.
Sharma added that the company will simplify operations as it resets the Xbox brand. "As we reset Xbox, we will simplify."
The Xbox brand accounts for roughly 6 percent of Microsoft's total revenue.
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Despite a recent slump in video game sales, the brand has remained a major influential force in the gaming market since entering the console space in 2001.
