Microsoft Cuts 4,800 Jobs as Xbox Undergoes Major Restructuring

Microsoft has announced plans to cut approximately 4,800 jobs, representing about 2.1% of its global workforce, with its gaming division, Xbox, accounting for a significant portion of the layoffs.

The company said the move is part of a broader restructuring aimed at adapting to changes in the technology industry and positioning the business for long-term growth.

In a memo to employees, Microsoft’s Executive Vice President Amy Coleman said the company must focus its resources on areas that deliver greater value to customers as the industry continues to evolve.

“Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it,” Coleman said.

She also clarified that the affected positions would not be directly replaced by artificial intelligence, although she acknowledged that “AI is changing how work gets done.”

The restructuring will have its biggest impact on Xbox, where more than 1,600 jobs will be eliminated immediately, with another 1,600 roles expected to be affected through organisational changes.

Xbox Chief Executive Asha Sharma, who recently assumed leadership of the gaming business, described the move as the beginning of “the most significant restructure in Xbox history.”

“These changes are about a bigger future for Xbox, not a smaller one,” Sharma said in a message to employees.

“History is full of companies that mistake longevity for inevitability. We will not be one of them.”

As part of the overhaul, Microsoft will spin off four game development studios—Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs—allowing them to operate independently outside the Xbox organisation.

The restructuring comes amid continued challenges across the global gaming industry, which has experienced widespread layoffs and studio closures over the past two years.

In 2024, Microsoft cut more than 2,000 Xbox jobs and closed four studios following its acquisition of Activision Blizzard. The company later announced plans to reduce as many as 9,000 additional roles while increasing investment in artificial intelligence.

Industry analysts say the latest move reflects Microsoft’s effort to redefine Xbox as gaming increasingly shifts across consoles, personal computers, cloud services and subscription platforms.

Technology analyst Paolo Pescatore described the restructuring as a major reset for the gaming business, noting that the company must now clarify Xbox’s role in an increasingly platform-agnostic gaming market.

According to Piers Harding-Rolls of Ampere Analysis, Microsoft’s decision to separate some of its studios rather than shut them down suggests the company wants to concentrate its internal resources on its largest gaming franchises while allowing smaller teams greater independence.

Following the announcement, Double Fine, which joined Microsoft in 2019, confirmed it would return to independent ownership.

In a statement, the studio thanked Xbox for seven years of support and said it was pleased to have reached an agreement that preserves its creative culture while returning ownership of its games to the company.

Compulsion Games also said its immediate focus would be supporting employees through the transition, expressing confidence in the studio’s future as an independent developer.

Microsoft has not disclosed the total financial impact of the restructuring but said the changes are intended to better align the company with future opportunities in gaming and emerging technologies.