Microsoft’s “reset” of Xbox cuts 4,800 jobs, with about a fifth of the unit’s workforce affected

Microsoft has announced a companywide job reduction of 4,800 positions, roughly 2.1% of its global workforce, and said the largest impact will fall on its Xbox gaming business. The move is part of a broader reorganization Microsoft described as a “reset” for Xbox.

According to an internal memo cited in reporting, the Xbox unit’s CEO, Asha Sharma, told employees that “our business today is not healthy.” She also said Xbox is operating at margins that are “3-10x lower” than comparable platform and publishing businesses, a gap she attributed to structural problems rather than near-term execution.

The layoffs include about 1,600 Xbox workers, with additional job reductions expected later this year as part of the same restructuring. Reporting also described Xbox as facing a difficult cost environment for console components, with Sharma characterizing the industry as being in a severe “hardware crisis” as costs rise.

The company’s messaging frames the restructuring as an attempt to restore Xbox’s economics and compete more effectively in a market dominated by PlayStation and Nintendo’s platforms. In the same context, Microsoft described Xbox’s performance as weakened enough to require a significant overhaul rather than incremental changes.

Microsoft has not provided, in the cited announcements and reporting, a detailed breakdown of which job functions, locations, or product lines are expected to be most affected beyond the high-level figures for Xbox staffing. It also did not disclose, in the available text, specific targets for how margins will change or what timeline would define success.

For Microsoft, Xbox is both a consumer brand and a technology platform, connected to subscriptions, software publishing, and content strategies that extend into areas like cloud gaming and game services. Cuts at Xbox can also send indicates to the company’s broader gaming pipeline, including how it balances first-party game development, hardware cycles, and third-party partnerships.

The step may also reshape the group’s operating model with a sharper focus on profitability. In other reporting of the same announcement, outlets described Studio-level changes as part of Xbox’s restructuring direction, though the company’s most direct disclosures in the available material emphasized headcount and business health rather than specific program details.

What to watch next is how Microsoft communicates the restructuring’s scope as the year progresses, including whether the additional Xbox reductions come with further product or studio decisions. Investors and industry observers will likely look for updated guidance on Xbox’s performance trajectory and how Microsoft plans to close the margin gap Sharma cited, alongside any clarity on affected teams and expected timing.