Microsoft has announced plans to cut approximately 4,800 jobs, representing about 2% of its global workforce, as the company embarks on a major restructuring that will significantly reshape its Xbox gaming business.
The layoffs form part of Microsoft’s wider effort to reduce costs while continuing heavy investments in artificial intelligence infrastructure and enterprise AI services.
Xbox division faces its biggest shake-up
The gaming unit will bear the largest share of the job losses, with around 3,200 positions expected to be eliminated during the next fiscal year. As part of the restructuring, Microsoft will also reorganize several of its game development studios. Some studios will become independent businesses, while others are expected to move under new ownership.
Another studio is currently under strategic review, with options including a potential sale or closure. The overhaul marks one of the most significant changes to the Xbox business since Microsoft’s acquisition of Activision Blizzard. In a company-wide memo, Microsoft Executive Vice President Amy Coleman said the restructuring reflects the changing nature of the technology industry.
According to Coleman, companies must adapt as industries evolve, adding that the workforce reductions are primarily affecting Microsoft’s commercial operations and Xbox division. She also clarified that the affected positions are not being directly replaced by artificial intelligence, although automation continues to change the way work is carried out across the company.
AI investment continues despite layoffs
The latest job cuts come as Microsoft continues spending billions of dollars expanding its AI capabilities. The company recently announced a $2.5 billion initiative aimed at placing thousands of engineers within enterprise customer organizations to accelerate the adoption of artificial intelligence technologies.
Like several other major technology firms, Microsoft has significantly increased investments in AI-focused data centres and computing infrastructure to remain competitive in the rapidly evolving market.
Xbox Chief Executive Asha Sharma informed employees that an initial round of about 1,600 job cuts will take effect immediately, with additional reductions to continue through the next fiscal period.
Sharma reportedly described the gaming division as facing financial challenges, noting that its profit margins remain substantially lower than those of key competitors. She said the restructuring is intended to position Xbox for sustainable growth over the coming years.
Studio restructuring underway
As part of the changes:
- Compulsion Games and Double Fine Productions will become independent studios while retaining ownership of their existing game franchises.
- Ninja Theory and Undead Labs are expected to transition to new owners with funding to continue ongoing projects.
- In France, Arkane Studios has entered a consultation process with employee representatives to examine future strategic options, including the possibility of a sale or closure.
The announcement follows several rounds of workforce reductions across the global technology sector as companies balance rising AI investments with efforts to improve operational efficiency.
Microsoft has implemented multiple layoffs since completing its $68.7 billion acquisition of Activision Blizzard in 2024, one of the largest deals in gaming industry history.
The latest restructuring signals Microsoft’s continued focus on reshaping its gaming business while prioritising long-term investments in artificial intelligence and enterprise technology.
