Microsoft cuts 4,800 jobs as Xbox begins its biggest restructuring ever. Four game studios will leave the company while Xbox focuses on growth and major franchises.
Microsoft has announced another major round of job cuts. This time, the company is letting go of 4,800 employees across different departments. The biggest impact will be on Xbox. The gaming division will lose about 3,200 workers before June 2027. Around 1,600 employees were laid off immediately. Xbox CEO Asha Sharma described the move as the “most significant restructure” in the company’s history. She admitted the decision was painful but necessary.
“Our business today is not healthy,” Sharma told employees.
She explained that Xbox had expanded too quickly while profits remained much lower than expected.
What To Look Out For In the Restructuring
The company is also changing its gaming business. Four studios will leave Xbox as part of the restructuring. Compulsion Games and Double Fine Productions will become independent again. Meanwhile, Ninja Theory and Undead Labs are expected to move to new owners once ongoing deals are completed.
France-based Arkane Studios is also reviewing its future. Despite these changes, Sharma assured staff that no previously announced Xbox games have been cancelled. Instead, Microsoft will focus more resources on successful franchises like Minecraft and The Elder Scrolls. The company believes these games will drive future growth.
Microsoft says the restructuring is about more than job cuts. The company wants to reduce management layers and make decisions faster. Some teams currently have up to 14 levels of management. That number will drop to five or fewer. Xbox also plans to cut vendor spending by 50 percent and simplify how teams work together. Sharma said,
“We know that great technology gets better when it gets simpler, not bigger.”
In addition, Mojang and King will now report directly to her. Helen Chiang has also been promoted to Chief Operating Officer, while longtime executive Dave McCarthy is leaving the company after 17 years.
AI Will Not Replace Affected Workers
The layoffs come as Microsoft faces growing pressure from investors. The company’s shares have fallen 19 percent in 2026. Many investors worry that Microsoft’s artificial intelligence strategy is not delivering strong results fast enough.
However, Microsoft insists AI is not replacing the affected workers. Chief People Officer Amy Coleman said AI is changing how work is done, but employees must continue learning new skills. Even with the cuts, Microsoft says it will invest heavily in Xbox this year. Sharma remains confident about the future, saying,
“We will return to growth in 2027.”
She ended her message with a warning:
“History is full of companies that mistake longevity for inevitability. We will not be one of them.”
