More than 1,600 Xbox employees were told they were losing their jobs on Monday as Microsoft announced 4,800 layoffs globally – roughly 2.1% of its workforce – in what the gaming division’s new chief executive called the “most significant restructure in Xbox history”.
Asha Sharma, who took over as Xbox CEO after Phil Spencer retired in February, said in a note to staff that another 1,600 roles would be cut over the coming fiscal year, bringing total gaming job losses to about 3,200. Four development studios – Compulsion Games, Double Fine Productions, Ninja Theory and Undead Lab – are being spun off, with a fifth entering a review that could lead to closure.
“Microsoft cuts 4,800 jobs, with Xbox losing over 3,200 roles in its biggest ever restructure, as the gaming division seeks a 'reset'.”
“These changes are about a bigger future for Xbox, not a smaller one,” Sharma wrote, adding: “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
The cuts come after years of turmoil for Xbox since Microsoft’s $68.7bn acquisition of Activision Blizzard closed in 2024. In 2024, the division culled more than 2,000 staff and shuttered four studios. Sharma described Xbox’s business as “not healthy”, with profit margins 3-10 times lower than rivals, and has pledged to return the division to growth by 2027.
Company-wide, executive vice president Amy Coleman told employees in a memo that Microsoft needed to focus on areas that can deliver for customers amid a “fast-changing industry”. She said the eliminated roles were “not being replaced by AI”, but acknowledged that AI is changing how work is done. On the commercial side, the cuts build on Microsoft’s $2.5bn push to embed 6,000 engineers inside enterprise clients to accelerate AI adoption.
“Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it,” Coleman said.
Tech analyst Paolo Pescatore told the BBC the changes marked a “major reset” for Microsoft, adding: “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.”
The announcement lands at an already difficult time for the gaming industry, with many studios still reeling from brutal layoffs in recent years. Microsoft itself cut up to 9,000 jobs in 2025 after doubling down on AI spending.