Microsoft has announced a major round of layoffs, cutting approximately 4,800 jobs worldwide—about 2.1% of its global workforce—as part of a significant restructuring of its Xbox gaming business and broader efforts to improve returns on years of heavy investment.
The company’s gaming division will bear the brunt of the restructuring, accounting for around 3,200 of the affected positions. Of these, nearly 1,600 employees will be laid off immediately, while additional organizational changes will take place across Microsoft’s gaming studios.
The overhaul marks one of the biggest strategic resets for Xbox since Microsoft’s $69 billion acquisition of Activision Blizzard. Although the landmark deal significantly expanded Microsoft’s gaming portfolio, Xbox continues to face stiff competition from Sony’s PlayStation and Nintendo in the global console market.
As part of its evolving strategy, Microsoft has increasingly shifted away from relying solely on Xbox-exclusive titles. Instead, the company has begun releasing several of its games on competing platforms to reach a broader audience and reduce dependence on console hardware sales.
In an internal memo, Xbox chief Asha Sharma informed employees that four game studios would be separated from Microsoft as part of the restructuring. Compulsion Games, the studio behind South of Midnight, and Double Fine Productions, known for Psychonauts, will become independent companies.
Meanwhile, Ninja Theory and Undead Labs will also be spun off, enabling them to independently develop franchises such as Senua and State of Decay 3. The future of Arkane Studios, currently working on a Blade game for Marvel, remains uncertain as Microsoft has begun discussions with the studio’s workers’ union in France to explore possible options.
The restructuring reflects Microsoft’s efforts to streamline its rapidly expanded gaming portfolio while focusing on long-term profitability and sustainable growth.
The layoffs also come at a time when major technology companies are under increasing pressure to justify massive investments in artificial intelligence. Industry analysts estimate that leading tech firms will collectively spend more than $700 billion on AI infrastructure this year, prompting companies to reduce costs in other areas.
Companies including Amazon and Meta have also announced significant workforce reductions in recent months as they redirect resources toward AI development, data centers and advanced computing infrastructure.
Microsoft, however, emphasized that the latest job cuts are not the result of artificial intelligence replacing employees. In a memo to staff, Chief People Officer Amy Coleman clarified that the eliminated roles are not being replaced by AI, while acknowledging that artificial intelligence is fundamentally changing how work is carried out across the company.
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