Microsoft to lay off another 4,800 workers, including Xbox gaming division

Microsoft announced plans to cut 4,800 jobs, representing about 2% of its global workforce, as it overhauls its Xbox gaming business and divests up to five studios. The move aims to boost returns following years of heavy investment in the division.

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Microsoft has nothing to share regarding specific impacts in Canada.

The restructuring of the gaming division will result in 3,200 job cuts, with 1,600 employees laid off on Monday. It remains unclear if any of these cuts will affect Microsoft workers in Canada. A Microsoft spokesperson stated the company had nothing to share regarding specific impacts in Canada.

Despite spending tens of billions of dollars to expand Xbox, including the acquisition of Activision Blizzard, Microsoft has struggled to close the gap with competitors Sony's PlayStation and Nintendo. This has prompted a strategic rethink of the gaming business, with the company increasingly shifting its focus toward distributing games across multiple platforms rather than relying solely on console-exclusive titles to drive Xbox hardware sales.

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the roles eliminated today are not being replaced by AI.

According to Asha Sharma, Xbox's new head, the restructuring involves divesting four studios. Compulsion Games, producer of 'South of Midnight,' and Double Fine Productions, maker of 'Psychonauts,' will become independent. Ninja Theory and Undead Labs will be spun off to focus on 'Senua' and 'State of Decay 3,' respectively. Management at Arkane Studios, developer of 'Dishonored,' is consulting with its union in France regarding options for its current project based on Marvel's Blade character.

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At the same time, what is true is that AI is changing how work gets done.

Chief People Officer Amy Coleman assured employees in a memo that the eliminated roles are not being replaced by AI, although AI is changing how work is performed. Analysts suggest the market may reward Microsoft more for demonstrating AI monetization scaling faster than AI-related costs, rather than solely for headcount reductions. The company's shares were down 1.4% on Monday, continuing a downward trend from the first half of 2026.

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That (targeted cuts) makes the announcement read more like portfolio reallocation and operating discipline than a fresh catalyst for the stock.