Microsoft has announced another major round of job cuts, eliminating about 4,800 roles across the company.
The biggest impact is falling on Xbox, where 3,200 positions will disappear over the current fiscal year. Half of those cuts are taking effect immediately, making it one of the largest restructurings in the history of Microsoft’s gaming business.
The layoffs affect about 2.1% of Microsoft’s global workforce and come as the company begins its new financial year. Microsoft said the decision is part of a broader effort to focus its people, investments, and resources on areas that will support long-term growth.
Xbox Takes the Biggest Blow
While Microsoft’s commercial sales organization is also losing jobs, Xbox is carrying the largest share of the cuts.
In a message to employees, Xbox CEO Asha Sharma described the changes as the biggest restructuring the gaming division has ever faced. She said around 1,600 roles are being eliminated immediately, while another 1,600 positions will be removed over the rest of the fiscal year. Four Xbox studios will also move to new ownership as part of the restructuring.
Sharma acknowledged that the gaming business has struggled financially despite years of heavy investment.
“Our business today is not healthy,” she told employees, adding that Xbox operates at much lower profit margins than comparable platform and publishing businesses.
Why Microsoft is Making the Cuts
Microsoft Chief People Officer Amy Coleman said the company is changing because the technology industry is changing rapidly. She said customer needs, business models, and the way software is built are evolving, requiring Microsoft to reorganize its workforce around its highest priorities.
Coleman also stressed that the layoffs are not a direct replacement of employees with artificial intelligence (AI). Instead, she said Microsoft has tried to reduce the number of job losses by moving thousands of workers into different roles over the past year and offering voluntary retirement packages before announcing the latest cuts.
A Difficult Period for Microsoft’s Gaming Business
The scale of the Xbox restructuring reflects the challenges Microsoft has faced in gaming even after spending heavily to expand the business.
So far, the company has invested billions of dollars in acquisitions, including Activision Blizzard, while pushing services such as Game Pass and cloud gaming. Even so, Xbox has continued to trail Sony’s PlayStation and Nintendo in key areas of the console market, leading Microsoft to rethink how the business operates.
The latest restructuring also includes simplifying management and narrowing Xbox’s focus as Microsoft looks for stronger financial performance from the division.
What Happens Next
For Microsoft, the layoffs mark another major reset as the company continues investing heavily in artificial intelligence while reshaping other parts of its business. For Xbox, the changes are even more significant.
With thousands of jobs disappearing, studios leaving the division, and leadership openly acknowledging the business is underperforming, Microsoft’s gaming arm is entering one of the most important rebuilding periods in its history. Whether the restructuring delivers the stronger and more profitable Xbox that Microsoft is aiming for will become clearer over the coming years.
