Microsoft has announced the elimination of 4,800 jobs, about 2.1 per cent of its global workforce, in its latest round of restructuring, with its gaming division, Xbox, bearing the brunt of the cuts.
More than 1,600 Xbox employees will lose their jobs immediately, while another 1,600 positions are expected to be phased out over the next year as the company embarks on what Xbox Chief Executive Asha Sharma described as “the most significant restructure in Xbox history.”
In a memo to employees, Microsoft Executive Vice President Amy Coleman said the restructuring was necessary to ensure the company remains competitive in a rapidly evolving technology landscape.
“Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it,” Coleman said, adding that while artificial intelligence (AI) was transforming the way work is done, the job cuts were not intended to be replaced by AI roles.
As part of the overhaul, Microsoft will spin off four game development studios, Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs, allowing them to operate independently.
Sharma described the move as a strategic reset rather than a retreat.
“These changes are about a bigger future for Xbox, not a smaller one,” she said. “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
She acknowledged the restructuring would be painful but said it was necessary to reshape Xbox’s content portfolio, platform and operations for long-term growth.
Meanwhile, game developers Mojang, the studio behind Minecraft, and King, creator of Candy Crush, will now report directly to Sharma as Microsoft sharpens its focus on its biggest gaming franchises.
The latest layoffs come amid continued turbulence across the global gaming industry, which has been hit by widespread job losses over the past few years.
In 2024, Microsoft cut more than 2,000 Xbox jobs and shut down four studios following its acquisition of Activision Blizzard. The company later announced plans to eliminate as many as 9,000 additional positions while accelerating investments in AI infrastructure.
The sector has also been grappling with rising hardware costs, prompting companies, including Microsoft, to increase prices for gaming consoles and related devices. Many analysts attribute the price hikes to surging demand for AI data centres, which has strained global supply chains.
Industry analysts believe Microsoft’s latest moves represent a fundamental repositioning of the Xbox business.
Technology analyst Paolo Pescatore described the restructuring as a “major reset,” noting that Xbox must redefine its identity as gaming increasingly shifts beyond traditional consoles to PC, cloud gaming and subscription services.
Similarly, Piers Harding-Rolls of Ampere Analysis said the changes reflect Microsoft’s intention to concentrate resources on its most valuable gaming franchises and largest audiences.
He noted that while Microsoft had previously acquired numerous studios to strengthen its Game Pass subscription service, the company now believes some teams would thrive better outside the Xbox organisation.
Unlike previous restructurings that resulted in studio closures, Microsoft has chosen to return some developers to independent ownership.
Double Fine, acquired by Microsoft in 2019, said it was grateful for its seven-year partnership with Xbox and welcomed the opportunity to regain ownership of its games and creative direction. Compulsion Games also expressed confidence about its future as an independent studio while pledging to support employees through the transition.
The restructuring underscores Microsoft’s broader effort to streamline operations while investing heavily in AI and positioning Xbox for the next phase of competition in an increasingly digital gaming market.
