Microsoft cuts 4,800 jobs and shrinks Xbox in 'significant restructure'

Microsoft is eliminating 4,800 positions, about 2.1% of its workforce, with its Xbox division absorbing a significant share of the cuts in what leadership calls the most extensive restructuring in the brand's history [1]. More than 1,600 roles will be removed from Xbox immediately, and another 1,600 jobs will be eliminated over the coming year, according to an internal memo from Xbox chief executive Asha Sharma [1]. Four game development studios — Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab — will be spun off as part of the overhaul [1]. Sharma, who succeeded Phil Spencer as head of Xbox in February 2026, told staff the moves were designed to reset the division's content portfolio, platform, and operations [5][1]. "These changes are about a bigger future for Xbox, not a smaller one," Sharma wrote, adding, "History is full of companies that mistake longevity for inevitability. We will not be one of them" [1]. Microsoft executive vice president Amy Coleman framed the company-wide reductions as a response to industry shifts. "Companies don't get to choose whether their industry changes; they only get to choose whether they change with it," Coleman said in a memo, noting that while the eliminated roles would not be replaced by artificial intelligence, "what is true is that AI is changing how work gets done" [1]. The layoffs follow a turbulent period for the gaming sector. In 2024, Xbox cut more than 2,000 staff and closed four studios purchased before its acquisition of Activision-Blizzard [1]. Microsoft later disclosed plans to lay off as many as 9,000 workers as it intensified multi-billion-dollar AI investments [1]. The Xbox brand, which Microsoft first introduced in 2001, has grown into a division encompassing four console generations, the Xbox Game Pass subscription service, and cloud streaming [5]. The latest hardware, the Xbox Series X and Series S, launched in November 2020 and have sold an estimated 35 million units worldwide as of February 2026 [6]. The restructuring places Minecraft developer Mojang and Candy Crush maker King under Sharma's direct oversight [1]. The announcement lands alongside broader industry cost pressures. Sony's PlayStation plans to stop releasing games on physical discs in 2028, and hardware manufacturers have raised prices on older consoles, citing demand from AI data centers that is outpacing supply [1].