Microsoft Cuts 4,800 Jobs As Xbox Faces 1,600 Layoffs In Major Reset

Microsoft is cutting around 4,800 roles, about 2.1% of its global workforce, with Xbox and commercial sales taking the biggest hit as the company reshapes its business around customer priorities, AI-led workflows, and long-term operational focus.
 

TL;DR

• Microsoft is eliminating around 4,800 roles, mostly across Xbox and commercial sales.
• Xbox will lose about 1,600 employees now, with 3,200 cuts expected through FY27.
• Microsoft says the jobs are not being replaced by AI, though AI is changing work.
• Xbox will simplify management, shift four studios, and focus on core franchises.

Microsoft Layoffs 2026 Hit Xbox And Commercial Sales Amid AI-Led Restructuring

Microsoft has announced one of its latest workforce reductions, eliminating around 4,800 roles as part of a broader company transformation. The cuts represent about 2.1% of its global workforce and follow earlier restructuring moves, including voluntary separations and role redeployments.

Amy Coleman, Microsoft’s EVP and Chief People Officer, said the decision comes as the company reorients its people, investments, and energy toward areas it sees as critical to serving customers in a fast-changing technology market.

“Our business is changing because the world around it is changing,” Coleman wrote to employees. She added that Microsoft must “adjust resources and roles and shift how we operate so we can have the greatest impact for our customers.”
 

Microsoft Says AI Is Changing Work, But Not Replacing These Roles

The layoffs arrive at a time when technology firms are increasing AI investments while reducing headcount, a pattern that has fueled worker concerns across the industry. Microsoft directly addressed that concern, with Coleman stating that the “roles eliminated today are not being replaced by AI.”

Still, she acknowledged the bigger workplace shift underway. “What is true is that AI is changing how work gets done,” Coleman wrote, noting that some daily tasks can now be automated and employees will need to keep building new skills.

Microsoft also said it has redeployed more than 4,000 employees into new roles over the past year, including another 500 this month. The company said it will continue exploring ways to reduce job eliminations where possible, including reskilling and internal placements.
 

Xbox Layoffs Bring The Biggest Restructure In The Gaming Division’s History

Xbox is also facing the sharpest restructuring.

Around 1,600 Xbox employees are being cut now, while roughly 3,200 total reductions are expected through fiscal year 2027, according to Asha Sharma’s employee note.

“We are beginning the most significant restructure in XBOX history,” Sharma wrote. She said Xbox’s current business is “not healthy,” with margins running “3–10x lower than comparable platform and publishing businesses.”

Sharma pointed to several pressure points, including a smaller install base, higher cost structure, slower-than-expected growth from Game Pass and multiplatform bets, and what she called “the most severe hardware crisis in its history.”

“We must reset XBOX,” she wrote.
 

Xbox To Flatten Management And Shift Four Studios To New Ownership

As part of the reset, Microsoft will transition four gaming studios to new management while aiming to preserve intellectual property and ongoing projects. Compulsion Games and Double Fine Productions will return to independent studio models, while Ninja Theory and Undead Labs are moving toward new ownership with funding for key projects.

Xbox is also reducing management layers from as many as 14 to no more than five, and ideally three. Helen Chiang has been promoted to chief operating officer, with end-to-end profit and loss responsibility across content, hardware, platform, and services.

The reorganization will put more focus on businesses such as Mojang and King, the studios behind Minecraft and Candy Crush, while moving away from broader creative bets that have not produced platform-scale returns.