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Microsoft has announced plans to cut about 4,800 jobs, representing roughly two per cent of its global workforce, as part of a major restructuring that will significantly reshape its Xbox gaming business.
The company said on Monday that about 3,200 of the affected positions would come from its Xbox division over the next fiscal year, marking the most extensive overhaul in the gaming unit’s history.
As part of the restructuring, Microsoft said four game studios would either be sold or spun off, while a fifth studio would undergo a strategic review that could result in its closure.
The latest layoffs add to a series of workforce reductions by the technology giant as it continues to invest heavily in artificial intelligence infrastructure and services.
In a memo to employees, Microsoft’s Executive Vice President, Amy Coleman, said the company was adapting to changes across the technology industry and noted that businesses must evolve as their industries change.
“Our business is changing because the world around it is changing,” Amy Coleman said.
“Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.”
She said most of the job cuts would affect Microsoft’s commercial operations and Xbox, adding that the positions being eliminated were not being replaced by AI, although automation was changing the way work is carried out across the company.
Coleman also said the restructuring builds on Microsoft’s recent $2.5 billion initiative to deploy about 6,000 engineers to work directly with major customers to accelerate AI adoption.
In a separate message to Xbox employees, Chief Executive Officer Asha Sharma said 1,600 roles would be eliminated immediately, with additional reductions to continue through the 2027 fiscal year.
Sharma described Xbox as facing significant financial challenges, saying its profit margins were substantially lower than those of its competitors.
She also acknowledged that the company’s strategy of relying on its Game Pass subscription service to drive growth had suffered a setback after a price increase last year led to millions of subscribers leaving the platform, forcing Microsoft to reduce subscription fees.
The restructuring follows Microsoft’s $68.7 billion acquisition of Activision Blizzard in 2024, after which the Xbox division has undergone several rounds of layoffs.
Under the changes, Compulsion Games and Double Fine Productions will become independent studios while retaining ownership of their game franchises. Ninja Theory and Undead Labs are expected to join new owners who will continue funding their ongoing projects.
Meanwhile, Arkane Studios in France has begun consultations on its future, with Microsoft considering options including a potential sale or closure.
The announcement comes days after Microsoft disclosed plans to increase Xbox console prices globally, citing rising component costs linked to growing demand for AI computing infrastructure. Rival gaming companies, including Sony and Nintendo, have also raised console prices in recent months, while Apple has increased prices for some of its Mac and iPad products.
