Microsoft Eliminates 2% Of Workforce, Plans More Cuts For Xbox
Microsoft eliminated 4,800 positions on Monday and plans to cut about 20% of its Xbox division as it restructures amid the rapid advancement of artificial intelligence.
Xbox will cut 3,200 roles this fiscal year, starting with 1,600 today, Xbox CEO Asha Sharma said in a memo to employees. The remaining 1,600 cuts will come in addition to the 4,800 immediately eliminated positions announced by Microsoft Chief People Officer Amy Coleman on Monday.
Microsoft will also sell or spin off four game development studios and explore strategic options for a fifth as Xbox goes for a “reset.”
The layoffs come as the tech sector grapples with the rapid advancement of artificial intelligence, which is driving a curious rebound in office leasing but also presents its biggest long-term threat. There were 116,845 tech sector layoffs through the first week of June, more than the 104,266 total job losses that Layoffs.fyi tracked throughout all of 2025.
“Our business is changing because the world around it is changing,” Coleman said in the letter to staff. “The way technology is built, deployed, and used is transforming faster than at any point in my time here.”
The 2.1% reduction in Microsoft’s global workforce will keep it positioned to deliver for customers in a fast-changing industry. The eliminated roles are not being replaced by AI, Coleman said.
But some everyday tasks can be automated, which “means we all need to keep learning, keep building new skills, and keep adapting as the work evolves,” she said.
Xbox will go through the most significant restructure in its history, as Sharma said in her memo that the business is not healthy.
“We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” she said.
Microsoft expanded its video game business aggressively in response to the pandemic, buying game production companies like Activision Blizzard and bolstering Xbox Game Pass, its monthly video game subscription service, The Wall Street Journal reported.
Game Pass did not grow at the pace expected, Sharma said. The company had expected to reach about 77 million subscribers this year, but it has about 30 million, the WSJ reported.
Microsoft’s stock has performed the worst among megacap tech stocks in 2026 as investors worry generative AI could replace enterprise software, CNBC reported. Microsoft’s AI models and services haven’t become as popular as those of some of its competitors, and its stock fell 19% as of Friday’s close.
Microsoft has done several rounds of job cuts in recent years, including one last July that laid off 9,000 people.
