Microsoft has announced plans to cut 4,800 jobs, representing 2.1% of its global workforce, with the majority of these layoffs affecting its commercial sales business and the Xbox division. The company's gaming unit, Xbox, is particularly impacted, facing a substantial "reset" that will see 1,600 employees laid off immediately and a total reduction of 20% of its workforce by the end of the fiscal year in June 2027. This includes the divestiture of four game studios, with the possibility of a fifth being sold off.
The Xbox division's CEO, Asha Sharma, in an internal memo, cited an unhealthy business operating at margins 3-10 times lower than competitors as the reason for the drastic restructuring. The memo also highlighted that the growth from initiatives like Game Pass and multi-platform strategies did not meet expectations, while the core business weakened. The industry also faces its "most severe hardware crisis in its history," according to Sharma. The restructuring, described as the "most significant restructure in XBOX history," aims to create a flatter organization with reduced management layers and a 50% cut in vendor spending.
As part of the changes, Compulsion Games and Double Fine Productions will become independent studios, retaining their intellectual property and a runway for future games. Ninja Theory and Undead Labs have reportedly entered agreements for new ownership and funding to continue their key projects. Arkane's management in France is also consulting on strategic options. Helen Chiang has been promoted to the newly created role of Chief Operating Officer for Xbox, with end-to-end profit and loss responsibility across content, hardware, platform, and services. The company emphasizes that no previously announced first-party games or projects are being canceled due to these reductions, though investment will be shifted towards higher-priority projects across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios.
Microsoft's Chief People Officer, Amy Coleman, attributed the job losses to changes in the technology industry and the need to adjust resources and roles in response to AI's impact. Coleman also stated that the eliminated roles are not being directly replaced by AI. She noted that Microsoft has been attempting to avoid layoffs, having redeployed over 4,000 employees into new roles in the past year, and that a voluntary retirement program saw more than 30% participation from eligible employees.
