Microsoft Restructures Xbox, Cuts 4,800 Jobs
Microsoft announced Monday that it will eliminate 4,800 jobs, representing about 2.1 per cent of its global workforce, as it restructures parts of the company and overhauls its Xbox gaming division. The gaming unit will account for 3,200 of the cuts, including 1,600 layoffs announced immediately and another 1,600 expected through the year.
The changes come after years of investment in gaming, including Microsoft’s acquisition of Activision Blizzard. Despite that spending, the company has continued to face competition from Sony’s PlayStation and Nintendo. Microsoft has also been shifting its gaming strategy toward making titles available on more platforms, rather than relying mainly on Xbox console exclusives.
As part of the restructuring, Microsoft plans to divest or spin off several studios. Montreal-based Compulsion Games, known for South of Midnight, and Double Fine Productions, maker of Psychonauts, will become independent. Ninja Theory and Undead Labs will be spun off to continue work on Senua and State of Decay 3, respectively. Arkane Studios, based in France and known for Dishonored, has begun consultations with its union over its future.
Asha Sharma, the new head of Xbox, told employees that the division’s business is operating at margins well below comparable platform and publishing companies. Compulsion Games said it would retain rights to its games and focus on supporting staff during the transition.
The cuts also come as Microsoft and other technology companies face pressure to fund large artificial intelligence investments while maintaining profitability. Microsoft said the eliminated roles are not being replaced by AI, though executives acknowledged that AI is changing how work is done.
Analysts said investors are likely to focus less on job reductions and more on whether Microsoft can grow AI-related revenue faster than its rising costs. The company’s shares fell Monday, following a difficult first half of 2026 for the stock.