Microsoft to cut 4,800 jobs, overhaul Xbox

Microsoft (MSFT) is cutting about 4,800 jobs, representing roughly 2.0–2.1% of its global workforce. Internal messages indicate the reductions are focused on the commercial sales organization and the Xbox gaming division. The cuts form part of a company-wide restructuring effort announced on July 6, 2026.

In an internal note, chief people officer Amy Coleman said the eliminated roles are not being replaced by artificial intelligence, while acknowledging that AI is changing how work is performed. The company has redeployed thousands of employees into new roles over the past year and has indicated it will provide support to those affected by the layoffs.

Xbox is undergoing what its leadership has described as the most significant restructure in the unit’s history. The division plans to reduce its workforce by approximately 3,200 roles through fiscal 2027, equal to roughly 20% of the Xbox global workforce. Around 1,600 of those role eliminations are effective immediately, with the remainder to be implemented over the fiscal year.

Xbox leadership has described the business as not healthy and noted that it has been operating at margins substantially below comparable platform and publishing businesses. The restructuring is framed as a multi-step reset aimed at addressing these financial pressures and reshaping the unit’s cost base and structure.

As part of the Xbox changes, four game studios will leave Microsoft’s ownership. Compulsion Games and Double Fine Productions will transition to independent management. Ninja Theory and Undead Labs have entered terms to join new ownership or be sold, moving them out of Microsoft’s internal studio portfolio.

Arkane Studios’ management has begun consultations with its works council to review strategic options for the studio. These steps collectively mark a significant reduction in Microsoft’s first-party Xbox studio footprint and are aligned with the broader effort to reset the gaming division.

Company communications emphasize that the positions being eliminated are not directly being replaced by AI systems. At the same time, leadership has stated that AI is changing how work gets done across the organization. This reflects an ongoing shift in Microsoft’s workforce priorities while it continues to reorganize roles and capabilities.