Microsoft to cut 4,800 jobs, including about 3,200 in Xbox, and plans major shake-up of gaming studios

Microsoft said it is eliminating 4,800 jobs, a move it framed as part of a companywide effort to cut costs in an era of rapidly changing technology, including AI. The cuts are expected to be carried out immediately for a portion of affected roles, with additional exits extending over the next fiscal year, according to messages shared with employees reported by CNBC.

Of the total reductions, Microsoft’s Xbox organization will cut about one-fifth of its staff, CNBC reported. Xbox CEO Asha Sharma wrote that 3,200 positions in Xbox would be eliminated in the reset, including 1,600 roles exiting on Monday and a further 1,600 people leaving throughout fiscal year 2027.

Microsoft tied the restructuring to the way work is being redesigned as technology deployment accelerates. Amy Coleman, the company’s chief people officer, told employees in a message that technology is changing “faster than at any point” during her tenure, and that the company was acting to adapt to that shift, CNBC reported.

In addition to headcount changes, Microsoft said it would spin off four gaming studios, leaving them to operate independently. The studio exits were described as part of a broader Xbox reorganization, as Microsoft tries to reshape how it produces and publishes games while also reducing overlapping functions.

The company’s broader layoffs were reported as affecting multiple parts of Microsoft, not only gaming. CNBC said the 4,800 job cuts come after Microsoft carried out a voluntary retirement program, with the remaining reductions continuing through the reset period.

The timing and size of the changes underscore the pressure large software companies face as investors and customers evaluate how AI will affect enterprise spending and the economics of software and services. For Microsoft, Xbox remains one of the company’s most visible consumer-facing units, and shifts there can ripple into how the market views its overall strategy beyond cloud and productivity.

Microsoft did not provide, in the reporting available here, granular detail on which specific functions, locations, or teams will be cut within its commercial and Xbox organizations. It also did not disclose financial targets or quantitative projections tied to the restructuring in the materials cited by CNBC, beyond describing the scope and sequencing of reductions and the planned studio moves.

What to watch next is what Xbox’s “reset” looks like in practice, including how the six publishing labels concept described in some coverage may affect game development and release plans, and whether Microsoft gives more clarity on which roles will be eliminated outside Xbox as the company completes its restructuring through fiscal year 2027.