Microsoft cuts 4,800 jobs in Xbox revamp amid AI investment

Microsoft announced on Monday it will eliminate about 4,800 jobs, representing roughly 2% of its global workforce, in a significant cost-cutting move that includes a sweeping restructuring of its struggling Xbox gaming division.

The cuts mark the deepest overhaul in Xbox's history. Approximately 3,200 gaming jobs will be shed over the coming fiscal year. Additionally, four game studios are being spun off or sold, and a fifth is undergoing a review process that could lead to its closure.

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Our business is changing because the world around it is changing. Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.

This announcement follows a series of mass layoffs across the technology giant as it channels substantial financial resources into the artificial intelligence race. Companies are investing tens of billions of dollars in AI-ready data centers and computing power.

Amy Coleman, Microsoft's executive vice president, stated in a memo to employees that the business is changing because the world around it is changing. She noted that the layoffs primarily affected Microsoft's commercial business and Xbox. While she clarified that the eliminated roles are not being replaced by AI, she acknowledged that automation is reshaping work across the company.

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Xbox’s business is not healthy, with profit margins 3-10 times lower than rivals.

On the commercial side, the cuts are intended to complement Microsoft's recent $2.5 billion initiative to embed 6,000 engineers within enterprise clients to accelerate AI adoption. At Xbox, CEO Asha Sharma informed employees that 1,600 positions are being cut immediately, with the remainder phased out through fiscal year 2027. Sharma described Xbox's business as "not healthy," with profit margins significantly lower than rivals, and has pledged to return the division to growth by 2027.

As part of the restructuring, Compulsion Games and Double Fine Productions will become independent entities, retaining their intellectual property. Ninja Theory and Undead Labs are in terms to join new owners who will fund their current projects. In France, Arkane's management is consulting with its Works Council regarding potential strategic options, which could result in further closures or a sale.

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History is full of companies that mistake longevity for inevitability. We will not be one of them.