Microsoft has announced 4,800 job cuts, representing about 2.1% of its global workforce, with Xbox accounting for a significant share of the reductions as part of what the company describes as a major restructuring.
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Company-wide layoffs announced
In a memo to employees, executive vice president Amy Coleman said the technology company must focus on areas that best serve customers as it adapts to a rapidly changing industry. She said businesses cannot control changes within their sectors but can choose how they respond.
More than 1,600 Xbox positions will be eliminated immediately, with a further 1,600 roles expected to be cut over the next year.
Xbox begins major overhaul
In a separate message to staff, Xbox chief executive Asha Sharma described the changes as "the most significant restructure in Xbox history."
She said the overhaul was intended to strengthen Xbox's long-term future rather than reduce its ambitions.
"These changes are about a bigger future for Xbox, not a smaller one," Sharma wrote, adding that companies should not assume long-term success is guaranteed without adapting.
As part of the restructuring, four Xbox game development studios — Compulsion Games, Double Fine Productions, Ninja Theory and Undead Lab — will be spun off from the company.
Sharma also acknowledged the impact on employees, saying the cuts were painful but arguing that Xbox required a broad reset across its content portfolio, platform and operations.
Industry pressures continue
Coleman said the eliminated positions would not be directly replaced by artificial intelligence, although she noted that AI is changing how work is performed across the business.
The announcement comes as the video game industry continues to face significant challenges following several years of widespread layoffs. In 2024, Xbox cut more than 2,000 jobs and closed four studios it had acquired before Microsoft's purchase of Activision Blizzard, the maker of Call of Duty.
More recently, Microsoft announced plans to cut up to 9,000 jobs while continuing to increase its multibillion-dollar investment in artificial intelligence.
Rising hardware costs have also led Microsoft and other technology companies to increase prices for gaming consoles and consumer devices, with growing demand for AI data centres contributing to supply pressures.
Studios move to independent ownership
Under the new structure, Minecraft developer Mojang and Candy Crush developer King will report directly to Sharma.
Paolo Pescatore, a technology analyst, said the changes represented a "major reset" for Xbox, adding that the company's challenge now is to define its identity as gaming increasingly spans consoles, PCs, cloud services and subscription platforms.
Piers Harding-Rolls of Ampere Analysis said the restructuring reflects Microsoft's intention to concentrate on its largest gaming franchises and audiences. He said the company had previously expanded its studio network to strengthen its Game Pass subscription service but had concluded that some development teams would be better positioned outside the Xbox organisation.
He added that allowing the studios to become independent, rather than shutting them down, was a positive outcome despite the difficult circumstances.
Double Fine and Compulsion Games will both return to independent ownership, taking their intellectual property with them. Double Fine, acquired by Microsoft in 2019, thanked Xbox for seven years of support and said the agreement preserved its history and culture while restoring ownership of its games. Compulsion said its immediate focus would be supporting employees through the transition and expressed confidence about its future.
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Adapted by ASEAN Now. Source 7 July 2026