Microsoft cuts 4,800 jobs, mainly affecting Xbox

Microsoft will cut around 4,800 jobs, equal to almost 2% of its global workforce, as part of a new restructuring that will mainly affect the division Xbox video games.

This is the largest staff reduction plan ever undertaken in the gaming sector by the company: approximately 3,200 positions will be eliminated over the next fiscal year, four development studios will be sold or separated from the group and a fifth is under review, with the possibility of a sale or closure.

Investments in artificial intelligence

In recent months, Microsoft has already announced several layoff plans, while it continues to invest heavily in the development of theartificial intelligence.

“Our business is changing because the world around it is changing,” he wrote to employees Amy Coleman, executive vice president of Microsoft. “Companies can’t choose whether their industry changes, they can only choose whether to change with it,” he added. Coleman also assured that the jobs performed by employees affected by the layoffs will not be replaced by artificial intelligence, while acknowledging that technology is changing the way people work within the company.

Microsoft axes 4,800 jobs as it resets Xbox https://t.co/mC4BOQ9arR

— Financial Times (@FT) July 6, 2026

The $2.5 billion plan

On the commercial front, the cuts will come alongside the $2.5 billion plan announced last week, with which Microsoft aims to place 6,000 engineers at client companies to accelerate the adoption of artificial intelligence even among the most reluctant companies so far.

Cuts in the Xbox division

The head of the Xbox division, Asha Sharma, communicated to employees that 1,600 positions will be eliminated with immediate effect, while the other cuts will be completed by fiscal year 2027. Since the closing, in 2024, of the acquisition of Activision Blizzard for $68.7 billion, Xbox has already been affected by several staff reduction programs. Sharma called the division’s business “unhealthy,” with profit margins “three to 10 times lower” than those of its competitors.

This is an important email I sent today to all employees at XBOX:

Team,

We are beginning the most significant restructure in XBOX history. After careful consideration, I’ve made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…

— ASHA (@asha_shar) July 6, 2026

Studies coming out of Microsoft

As part of the reorganization, Compulsion Games and Double Fine Productions will become independent companies, retaining ownership of their respective intellectual properties and video game catalogs. Ninja Theory and Undead Labs will instead pass to new owners. Finally, in France, Arkane will start a consultation with the works council to evaluate different strategic options, a process that could end with the sale of the studio or its closure.