Key takeaways
- Microsoft Cuts Jobs as it restructures operations and reduces costs, eliminating 4,800 positions in the process.
- Xbox will lose one-fifth of its workforce, with four studios leaving Microsoft.
- Microsoft says AI is changing work, but not directly replacing affected employees.
Microsoft Cuts Jobs as part of a broader cost-cutting effort, eliminating 4,800 positions—about 2.1% of its workforce. The company is also restructuring its gaming division, reducing the Xbox unit by nearly one-fifth and spinning off four studios to streamline operations.
Microsoft expands cost-cutting efforts
Microsoft said the layoffs take effect immediately following a voluntary retirement program introduced earlier this year. The reductions affect multiple business units, including Xbox and the company’s commercial sales organization.
Amy Coleman, Microsoft’s chief people officer, said the company is adapting to rapid changes across the technology industry.
“The way technology is built, deployed, and used is transforming faster than at any point in my time here,” Coleman wrote in a message to employees. She added that the company remains focused on reducing future job eliminations where possible.
The company said more than one-third of eligible employees accepted its voluntary retirement offer, which targeted many U.S. employees at the senior director level and below.
Microsoft Cuts Jobs in multiple rounds over the past two years, with the latest layoffs announced as investors continue to question the company’s long-term artificial intelligence strategy despite strong growth in cloud computing and LinkedIn.
Xbox reduces workforce and reshapes gaming business
Microsoft Cuts Jobs within its Xbox division, eliminating about 3,200 positions in total. Half of those layoffs were included in Monday’s announcement, while the remaining reductions will be phased in through fiscal year 2027, according to Xbox CEO Asha Sharma.
“I recognize that a year-long restructuring creates additional challenges,” Sharma wrote in a message to employees. “Unfortunately, it is not possible to make all the necessary changes in a single day.”
The restructuring also changes Microsoft’s gaming portfolio. Compulsion Games and Double Fine Productions will become independent studios again, while Ninja Theory and Undead Labs are expected to move under new ownership.
Arkane Studios is reviewing strategic options through discussions with its works council, according to Sharma.
Double Fine thanked Microsoft in a post on X, saying it appreciated “seven great years together” and welcomed the return of ownership of its games.
Market pressure drives strategic changes
Microsoft shares fell about 1% during Monday’s trading session, while the Nasdaq Composite Index gained about 1%. The company’s stock has declined 19% this year, making it the weakest performer among the largest U.S. technology companies.
Although Microsoft continues to report growth in cloud services and LinkedIn, its Windows licensing, Surface hardware, and Xbox businesses have faced weaker performance.
D.A. Davidson analyst Gil Luria said Microsoft’s gaming business may no longer fit the company’s priorities.
“This is not a business Microsoft needs to be in, or should be in,” Luria said during a CNBC interview. He added that a complete Xbox spin-off remains a possibility.
Coleman said artificial intelligence is changing how employees work, but is not directly replacing those affected by the layoffs.
“Some of the tasks we do every day can now be automated,” she wrote. “That means we all need to keep learning, keep building new skills, and keep adapting as the work evolves.”
