Asha Sharma, Xbox’s recently minted chief executive, told staff on Monday that the company was beginning “the most significant restructure in Xbox history” – words that landed as Microsoft confirmed it was cutting 4,800 jobs, roughly 2.1% of its global workforce. More than 1,600 gaming roles are being axed immediately, with another 1,600 to follow over the coming fiscal year, in a sweeping overhaul that will also see four game development studios – Compulsion Games, Double Fine Productions, Ninja Theory and Undead Lab – spun off or sold.
The layoffs, announced by executive vice president Amy Coleman in a company-wide memo, come as the tech giant attempts to navigate what she described as a “fast-changing industry”. “Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it,” Coleman wrote, adding that the eliminated roles would not be replaced by AI, even as she acknowledged that automation was reshaping work across the company.
“Microsoft cuts 4,800 jobs, with 1,600 immediate losses at Xbox, in what CEO Asha Sharma called the 'most significant restructure'.”
Xbox’s struggles are well documented. The division has been through successive rounds of cuts since Microsoft’s $68.7bn acquisition of Activision Blizzard closed in 2024, and Sharma described its business as “not healthy”, with profit margins 3-10 times lower than rivals. She succeeded longtime chief Phil Spencer, who retired in February, and has pledged to return the division to growth by 2027. “History is full of companies that mistake longevity for inevitability,” she wrote. “We will not be one of them.”
The announcement adds to a brutal period for the gaming industry, which has seen mass layoffs and studio closures in recent years. In 2024 alone, Xbox culled more than 2,000 staff and shut four studios. Tech analyst Paolo Pescatore said the changes marked a “major reset” for the company. “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 told the BBC.
On the commercial side, Coleman said the cuts would build on Microsoft’s $2.5bn push, announced last week, to embed 6,000 engineers inside enterprise clients to accelerate AI adoption. But for Xbox, the immediate focus is survival. Sharma said on Monday that while the cuts were “painful”, a “reset” was needed across the entire content portfolio, platform and operations.