Microsoft has announced it is cutting 4,800 jobs – roughly 2.1% of its workforce – with Xbox bearing the brunt of the latest layoffs as the tech giant embarks on what its new chief executive described as “the most significant restructure in Xbox history”.
More than 1,600 roles have been axed immediately at Xbox, with another 1,600 positions set to be cut as part of the shake-up, according to a memo from Amy Coleman, executive vice president at Microsoft. In a note to employees, Coleman said the company needed to focus on areas that can deliver for customers amid a “fast-changing industry”.
“Microsoft cuts 4,800 jobs, with over 1,600 immediate losses at Xbox as part of major restructure.”
Asha Sharma, who recently took over as Xbox’s chief executive, warned staff that four game development studios – Compulsion Games, Double Fine Productions, Ninja Theory and Undead Lab – would be spun off as part of the changes. “These changes are about a bigger future for Xbox, not a smaller one,” Sharma said in a note shared on X. “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
Coleman pointed to shifting customer needs in announcing the company-wide cuts, adding: “Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.” She noted that while Microsoft would not replace the lost roles with artificial intelligence, “what is true is that AI is changing how work gets done.”
The announcement comes at an already turbulent time for the gaming industry, with many studios still reeling from widespread layoffs in recent years. In 2024, Xbox culled more than 2,000 staff and shuttered four studios acquired before its bumper purchase of Call of Duty maker Activision-Blizzard. Little more than a year earlier, Microsoft said it would cut up to 9,000 jobs after setting out plans to double down on its multi-billion-dollar AI spending.
Tech analyst Paolo Pescatore told the BBC the changes marked a “major reset” for the company, which faces further challenges ahead. “The challenge is not just cutting costs; it is defining what Xbox stands for in a world where games are moving across console, PC, cloud and subscription platforms,” he said.
Sharma said on Monday that while she knew the cuts were “painful”, a “reset” was needed across Xbox’s entire content portfolio, platform and operations. As part of the sweeping changes, Minecraft developer Mojang and Candy Crush developer King will also be affected, though the exact impact on those studios remains unclear.