Microsoft is eliminating 4,800 jobs, mostly within the company’s Xbox unit. The layoffs will impact just over 2% of the company’s global workforce, according to EVP and Chief People Officer Amy Coleman.
Coleman revealed the news in a letter to staff on Monday morning, explaining that the move was an effort toward “aligning our investment, people and energy to our business priorities,” and noting that over the past year, thousands of employees have been reassigned to other roles (including 500 people earlier this month).
“Today’s changes mostly fall within our Commercial and Xbox organizations. In our Microsoft Commercial Business, they build on last week’s Frontier Company announcement, reshaping how we work and embedding our engineering experts alongside customers so we can help them accelerate their technology deployments,” she wrote. “In Xbox, we are restructuring to position the business for long-term success.”
Meanwhile, Xbox CEO Asha Sharma called the cuts “the most significant restructure in Xbox history” in a message to employees and detailed that the cuts will come through fiscal year 2027. 1,600 employees were let go on Monday, with the remaining 3,200 to come over the next year.
“We will also transition four of our gaming studios to operate under new management, with the goal of preserving both their intellectual property and ongoing projects,” Coleman added.
The VP also noted that the reason for the cuts is simply because the business is changing and evolving, and that the Xbox division is “restructuring” entirely. She swore that the positions eliminated in Monday’s cuts “are not being replaced by AI,” but still argued that “some of the tasks we do every day can now be automated.”
Coleman further warned that “there will be more changes ahead,” though did not specify what that meant.
“Our business today is not healthy,” Sharma added in her message. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected.”
“As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history,” she concluded. “We must reset Xbox.”
