Microsoft Cuts 4,800 Jobs with Xbox Division Hit Hardest in AI Era Restructuring

Microsoft announced a reduction of 4,800 jobs, representing about 2.1% of its global workforce, as part of ongoing cost-cutting efforts amid the rise of artificial intelligence. The Xbox gaming division is the most affected, losing roughly one-fifth of its employees. Amy Coleman, Microsoft’s Chief Human Resources Officer with 27 years at the company, told staff that the pace of technological change is faster than ever and emphasized the need for employees to continuously learn new skills despite the layoffs.

Xbox CEO Asha Sharma revealed in an internal email that the division plans to cut 3,200 positions by fiscal year 2027, with 1,600 jobs already eliminated. Sharma acknowledged the challenges of a year-long reorganization but expressed confidence that Xbox will return to growth by 2027. Microsoft’s stock has been the weakest among tech giants in 2026, down 19% amid investor concerns that generative AI models could disrupt traditional enterprise software, while Microsoft’s own AI services have yet to achieve major success.

Growth is accelerating in Microsoft’s cloud services and LinkedIn, but revenue from Windows, Surface devices, and Xbox is declining. As part of the restructuring, four game studios will separate from Microsoft: Compulsion Games and Double Fine Productions will become independent again, while Ninja Theory and Undead Labs are transitioning to new ownership. The French studio Arkane, acquired in 2021 through the ZeniMax Media purchase, is exploring strategic options with its union. Additionally, the business unit handling customer sales will face cuts.

Earlier in April, Microsoft introduced a voluntary retirement program targeting senior managers and below in the U.S., with over a third of eligible employees accepting the offer.