Microsoft to Lay Off 4,800 Employees in Major Restructuring Targeting Xbox Division

Microsoft plans to lay off 4,800 employees, according to ANI, as part of a broader restructuring aimed at aligning investments with changing business priorities. This represents approximately 2.1% of the company's global workforce. The layoffs represent one of Microsoft's biggest overhauls, second only to June last year when it cut nearly 4% of its workforce. That earlier move eliminated around 9,000 roles.

The restructuring heavily targets the Xbox gaming division. Microsoft will cut 3,200 jobs in this unit over the coming fiscal year, according to AFP. This includes 1,600 immediate layoffs.

Amy Coleman, Microsoft's Executive Vice President, confirmed the decision in a staff memo. Coleman told ANI: "Today we are eliminating around 4,800 roles, about 2.1% of our global workforce."

Xbox Division Facing Overhaul

The gaming unit faces immediate reductions. Xbox CEO Asha Sharma reported that 1,600 of the 3,200 gaming cuts are immediate. The remaining layoffs will occur through fiscal year 2027.

Four Xbox studios are leaving the company. Compulsion Games and Double Fine Productions are going independent. Ninja Theory and Undead Labs are joining new owners. Meanwhile, Arkane's management in France has begun a required consultation with its Works Council. This signals potential further closures or sales.

Sharma described Xbox's business as "not healthy", with profit margins "3-10 times lower" than rivals. Despite heavy investments like the acquisition of Activision Blizzard, Microsoft has struggled to close the gap with Sony's PlayStation and Nintendo. Furthermore, Xbox lost millions of subscribers after a 2025 Game Pass subscription price hike. This forced a fee-cut reversal.

The Role of AI

Artificial intelligence is influencing the broader strategy. However, Coleman clarified the immediate cause in the memo. Coleman told ANI: "I also want to be direct that the roles eliminated today are not being replaced by AI."

The layoffs build on Microsoft's $2.5bn "Frontier Company" push announced last week. This initiative embeds 6,000 engineers with major clients to accelerate AI adoption. Coleman said that while roles are not directly replaced by AI, automation is actively reshaping how work is done across the company.

Coleman explained the evolving workplace. Coleman told ANI: "Some of the tasks we do every day can now be automated, and that means we all need to keep learning..."

Corporate Realignment and Support

Microsoft is adapting to rapid market shifts. Coleman told ANI: "Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it."

The company has redeployed more than 4,000 employees into new roles over the past year. This includes 500 staff members in the current month alone. More than 30% of eligible employees chose to participate in a recent voluntary retirement programme.

Coleman warned that more organisational changes are expected in the future. Other parts of the business will undergo similar transformations. To assist staff, Microsoft is offering financial support, resources, and continued investment in employee reskilling. This includes training for AI capabilities.