Microsoft cuts 4,800 jobs as major Xbox restructuring begins

Microsoft has announced plans to cut 4,800 jobs, representing about 2.1% of its global workforce, with its Xbox division expected to be among the hardest hit by the latest round of layoffs.

In a memo to employees, Executive Vice President Amy Coleman said the company must focus its resources on areas that deliver greater value to customers as it adapts to rapid changes across the technology industry.

As part of the restructuring, more than 1,600 positions within Xbox will be eliminated immediately.

In a separate message to staff, Xbox Chief Executive Asha Sharma described the move as the beginning of the most significant restructuring in the gaming division’s history.

She said an additional 1,600 Xbox jobs would be cut over the next year, bringing the total number of planned layoffs in the division to more than 3,200.

Sharma also announced that four Xbox game development studios—Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs—will be spun off as part of the reorganisation.

Despite the changes, she said the restructuring is intended to strengthen Xbox’s long-term future rather than reduce its ambitions.

Coleman explained that the broader workforce reductions reflect the company’s need to adapt to evolving customer demands and a rapidly changing business environment.

While she stressed that employees are not being replaced by artificial intelligence, she acknowledged that AI is transforming the way work is carried out across the organisation.

The latest announcement comes as the gaming industry continues to face significant challenges following years of widespread job cuts and restructuring.

In 2024, Xbox laid off more than 2,000 employees and closed four studios it had acquired before Microsoft’s takeover of Activision Blizzard, the publisher behind the Call of Duty franchise.

Just over a year later, Microsoft revealed plans to eliminate as many as 9,000 jobs as it continues to invest billions of dollars in artificial intelligence.

The industry has also been affected by rising hardware costs, prompting Microsoft and other manufacturers to increase the prices of gaming consoles and other consumer devices. Some analysts attribute the higher costs to growing demand for infrastructure supporting AI technologies.

Sharma acknowledged that the latest cuts would be difficult for affected employees but said a comprehensive reset was necessary across Xbox’s content portfolio, platform and operations.

She also announced that Mojang, the developer of Minecraft, and King, the studio behind Candy Crush, will now report directly to her as part of the organisational changes.