Microsoft will lay off 4,800 employees, accounting for about 2.1% of its total workforce. Most of the layoffs are happening in Microsoft’s Xbox gaming division and its commercial sales operations, and within Xbox, the company is embarking on what it calls “the most significant restructuring in Xbox history,” according to an official statement from Xbox CEO Asha Sharma.
Xbox plans to cut approximately 3,200 jobs during fiscal year 2027 (FY27). According to an official statement from the company, of the 3,200 positions, approximately 1,600 employees will lose their jobs immediately, while the remaining layoffs will occur throughout the remainder of fiscal 2027.
Xbox layoffs
These Xbox layoffs Unrelated to Microsoft’s immediate companywide layoffs of 4,800 employees, this means another 1,600 Xbox employees will leave later in fiscal 2027. Overall, about 20% of Xbox employees are expected to leave as a result of the restructuring. Asha Sharma, executive vice president and CEO of Microsoft Gaming, acknowledged that spreading the layoffs over a year will be difficult for employees.
“I recognize that a year-long reorganization will bring additional challenges. Unfortunately, it is not possible to accomplish all the necessary changes in one day,” said Asha Sharma. Sharma said the layoffs were not due to lack of talent or poor job performance. “Today’s decision does not reflect their talent or dedication,” she added.
Sharma said the real problem is that the financial health of the Xbox business is not healthy. She said Xbox’s operating margins are three to 10 times lower than those of similar gaming platforms and publishing companies. Xbox enters the current era of gaming with fewer console users and higher operating costs. Xbox’s official statement said that the company has invested heavily in Game Pass, multi-platform games and a larger game portfolio, hoping that these businesses can grow faster.
Sharma said that enterprise Value was created, but it wasn’t growing as fast as Xbox expected. Even after adding more employees, spending more money and giving projects more time, instead of improving, Xbox’s main gaming business grew weaker. The gaming industry is facing the “worst hardware crisis in history,” necessitating a complete Xbox reset. Due to these issues, Xbox said it had to “reset” its business, according to an official statement.
Reset Xbox Game Studio
Xbox says it has acquired a number of game studios since 2018, but the number of games released across the industry is growing much faster. The company says it’s not possible or necessary to own every successful independent game studio. Sharma also acknowledged that Xbox isn’t the best home for game studios of all types. She revealed that, on average, Xbox loses 64 cents for every $1 invested in certain studios.
Xbox says it now wants to support more independent developers rather than trying to own them. As part of the reorganization, Compulsion Games and Double Fine Productions will leave Microsoft and become independent studios again. Both studios will retain the intellectual property (IP), game catalog and funding for their next games. Ninja Theory and Undead Labs will also relinquish ownership of their Xbox and transfer it to new owners. New owners will provide funding so Senua and State of Decay 3 can continue development
In France, Arkane Studios has begun discussions with its working committee to review possible future options for the studio. Xbox also confirmed layoffs at Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios. However, Xbox says that none of its publicly announced first-party games have been canceled as a result of these layoffs.
Changes inside Xbox
Xbox is also changing the way the company is managed because it believes the organization has grown too big and complex. Sharma said work currently goes through as many as 14 layers of management in some parts of Xbox. She also said that although the number of players and game time have declined, the size of the platform team has expanded by 40%.
This additional complexity slows decision-making and reduces accountability. Xbox plans to reduce management levels to no more than five, and preferably three. The company also plans to simplify its technology, share more services among teams and cut vendor spending by 50%.
leadership changes
Xbox has created a chief operating officer (COO) position for the first time. According to an official statement from Xbox, Helen Jiang has been promoted to this position and will be responsible for Xbox content, hardware, platforms and services.
Sharma said Helen Jiang helped build important Xbox businesses like Xbox Live and later led the Mojang and Minecraft franchises. Longtime Xbox executive Dave McCarthy is retiring after 17 years with the company.
Microsoft’s view on artificial intelligence
Microsoft says this layoffs According to CNBC, Microsoft Chief People Officer Amy Coleman said that artificial intelligence is changing the technology industry.
“The way technology is built, deployed and used is changing faster than at any time in my time,” Coleman said, stressing, however, that AI will not directly replace unemployed workers. “I also want to make it clear that the roles that are being eliminated today will not be replaced by artificial intelligence.” At the same time, she said artificial intelligence is changing the way employees work. “At the same time, artificial intelligence is changing the way work is done, that’s a fact.”
She added, “Some of the tasks we perform every day can now be automated, which means we all need to keep learning, keep developing new skills, and keep adapting as our jobs evolve.”
microsoft performance
Microsoft is the worst-performing large technology stock in 2026, with its shares down 19% as of Friday’s close. According to CNBC, investors are worried that generative artificial intelligence may reduce demand for traditional enterprise software, and Microsoft’s own artificial intelligence products have not yet achieved significant commercial success.
While Microsoft’s cloud business and LinkedIn continue to grow, other businesses such as Windows licenses, Surface devices and Xbox have struggled. According to The Verge, Microsoft has laid off about 9,000 employees last year, and the latest layoffs are another major round of layoffs.
What Microsoft sees for the future
The reorganization aims to “create a bigger future for XBOX, not a smaller future.” Microsoft will continue to invest heavily in Xbox, but with greater focus, rigor and clarity. Sharma’s goal is to make Xbox one of the few companies that provides entertainment to more than 1 billion people every day. “We will resume growth in 2027,” she added.
In his closing remarks, Sharma warned that long-established companies cannot assume that they will always be successful. “There are many companies throughout history who have mistaken longevity as a given. We will not be one of them,” Sharma added.
