Microsoft announces 4,800 job cuts, with Xbox facing deepest impact

Microsoft has announced plans to cut 4,800 jobs, representing approximately 2.1% of its global workforce, as it pursues further cost reductions amid changes associated with artificial intelligence.

Xbox division faces the largest reduction

The Xbox gaming division is expected to be affected most heavily. An internal email attributed to Xbox CEO Asha Sharma said the division plans to cut 3,200 positions by fiscal year 2027, with 1,600 removed as of the announcement.

The source described the Xbox workforce reduction as one-fifth of the division’s employees. Sharma said the restructuring would occur across a full year because the necessary changes could not all be completed in one day. She also said the division was expected to return to growth in 2027.

Microsoft’s customer-sales business is also set to undergo reductions.

AI cited as changing work, not replacing staff

Chief Human Resources Officer Amy Coleman told employees that technological change was moving at an unprecedented pace for the company. She said artificial intelligence was not replacing the employees being laid off, while also saying it was changing how work is done and that workers would need to continue developing skills.

The reductions therefore combine a cost-cutting programme with a restructuring shaped by AI-related changes in work, rather than being presented as direct replacement of the affected employees by AI.

Studio ownership changes

Four game studios are set to separate from Microsoft as part of the announced changes. Compulsion Games and Double Fine Productions will become independent again after being acquired during the last decade.

Ninja Theory and Undead Labs, which joined Microsoft in 2018, have entered agreements to move to new ownership, according to Sharma. Arkane, the French studio included in Microsoft’s acquisition of ZeniMax Media for 8.1 billion dollars in 2021, is discussing strategic options with its works council.

Wider business context

The source said Microsoft’s stock had fallen by 19% by the close of trading last Friday in 2026, making it the weakest performer among major technology companies during that period. It linked investor concerns to the possibility that generative models could displace parts of enterprise software, while saying Microsoft’s own AI-based models and services had not yet become a significant success.

Cloud services and LinkedIn were described as areas of accelerated growth. Windows, Surface devices and Xbox were described as lagging areas with shrinking revenue.

Microsoft had previously announced a voluntary retirement plan in April for US employees at senior manager level and below. More than a third of eligible employees accepted that offer.

Sources

• Microsoft Lays Off 4,800 Employees and Xbox Suffers the Hardest Blow - Thai Times