Microsoft Cuts 4,800 Jobs Mainly in Xbox Division Amid Restructuring

Microsoft announced on Monday a layoff of 4,800 employees, representing about 2.1% of its global workforce, as part of a new efficiency initiative. The company revealed for the first time the scale of these cuts, with approximately 1,600 job losses immediately coming from its Xbox division. Xbox division CEO Asha Sharma also informed staff that an additional 1,600 employees will leave by fiscal year 2027, totaling around 3,200 layoffs or one-fifth of the division's workforce.

This round of layoffs follows multiple reductions over the past two years, including about 15,000 job cuts last year and a voluntary retirement program launched in April that saw 3,000 employees depart. As of June 2025, Microsoft employed roughly 228,000 people worldwide. Alongside workforce reductions, Microsoft announced that four game studios will be separated from the company: Compulsion Games and Double Fine Productions will become independent, while Ninja Theory and Undead Labs are expected to be sold. French studio Arkane Studios is currently consulting with its workers on strategic options.

The restructuring comes amid reports that Microsoft is reconsidering its gaming operations, including earlier speculation about spinning off Xbox as a separate company. Beyond gaming, the company’s commercial sales division will also face cuts under the efficiency plan.

Microsoft’s stock has fallen 19% since the start of the year, marking it as the worst-performing major tech giant. Investor concerns focus on the potential impact of generative AI models on demand for enterprise software, a key growth driver. Critics also note that Microsoft’s AI services have yet to achieve significant commercial success, and CEO Satya Nadella has not presented a clear AI strategy. While cloud services and LinkedIn have shown accelerated growth recently, sales of Windows licenses, Surface devices, and Xbox remain weak, with gaming revenues declining.

Despite these challenges, Microsoft continues to invest heavily in AI and computing infrastructure, with capital expenditures projected to reach around $190 billion this year to expand AI capabilities and reduce reliance on OpenAI.