Microsoft Cuts 4,800 Jobs, Slashing 20% of Xbox Workforce Amid AI Shift

Microsoft announced a new round of layoffs affecting 4,800 employees, representing about 2.1% of its global workforce. The gaming division Xbox will be hit hardest, with approximately 20% of its staff cut. Xbox CEO Asha Sharma revealed that 3,200 positions will be eliminated by fiscal year 2027, with 1,600 layoffs occurring immediately and another 1,600 planned later as part of a broader efficiency program.

Amy Coleman, Microsoft’s Chief Human Resources Officer, explained in a message to employees that rapid technological changes, especially advances in artificial intelligence, are reshaping how technology is developed and used, necessitating organizational adjustments. However, she emphasized that AI is not replacing the laid-off workers but is changing the nature of their work, requiring new skills and adaptation.

As part of the restructuring, four game studios will be separated from Microsoft. Compulsion Games and Double Fine Productions will become independent companies again, while Ninja Theory and Undead Labs will be sold to new owners. Arkane Studios, acquired through the $8.1 billion ZeniMax Media purchase in 2021, is exploring strategic options with its French employee representatives.

Microsoft launched a voluntary retirement program in April targeting senior and mid-level managers in the U.S., with over a third of eligible employees already offered the option. Despite growth in cloud services and LinkedIn, Microsoft’s Windows, Surface devices, and Xbox divisions continue to face revenue declines. This latest layoff wave follows previous cuts of 9,000 jobs last year and places Microsoft alongside other tech giants like Oracle, Meta, and Amazon that have also reduced staff recently.

The number of affected employees in Israel has not yet been disclosed. Sharma acknowledged the challenges of a year-long reorganization but stressed the need for gradual change to restore growth by 2027.