Key Takeaways
- Microsoft announced the elimination of about 4,800 jobs, impacting its Xbox gaming division.
- The restructuring includes the divestment of four game studios and a review process for a fifth studio.
- Asha Sharma, new head of Xbox, aims to return the business to growth by 2027.
Microsoft has announced significant job cuts as part of its restructuring efforts in the Xbox gaming division. The company is eliminating approximately 4,800 jobs, or roughly 2 per cent of its global workforce, according to a statement from Microsoft’s executive vice president, Amy Coleman.
The layoffs are aimed at streamlining operations and improving financial performance, particularly in the Xbox sector, which has struggled to compete with rivals like Sony's PlayStation and Nintendo. Coleman stated that the cuts would build on Microsoft’s $2.5 billion push to embed engineers inside enterprise clients to accelerate AI adoption.
Asha Sharma, who succeeded Phil Spencer as head of Xbox, outlined plans for a broader restructuring in a memo to employees. She described Xbox’s business as “not healthy,” with profit margins “3-10 times lower” than those of its competitors. Sharma has pledged to return the division to growth by 2027.
The restructuring will involve divestment of four studios: Compulsion Games and Double Fine Productions will become independent, while Ninja Theory and Undead Labs have entered into terms with new owners for their current projects. In France, Arkane’s management is beginning a required consultation with its Works Council to review potential strategic options.
Coleman emphasized that the eliminated roles are “not being replaced by AI,” but acknowledged that automation is reshaping how work is done across the company. She noted that companies must adapt to changes in their industries or risk becoming obsolete, stating, “Our business is changing because the world around it is changing.”
The job cuts come as Microsoft invests heavily in artificial intelligence (AI) and data centres. The technology giant has spent tens of billions of dollars on AI-ready infrastructure, reflecting a broader trend among Big Tech companies to show returns from their massive investments in AI.
Sharma’s memo highlighted the need for Xbox to shift its strategy toward distributing games across more platforms rather than relying solely on console-exclusive titles. She wrote, “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
The restructuring is part of a broader effort by Microsoft to boost returns after years of heavy investment in the Xbox division. The company’s acquisition of Activision Blizzard, worth $68.7 billion, has been a significant factor in its gaming strategy but also contributed to financial challenges.
Microsoft’s decision to cut jobs and overhaul its Xbox business reflects the competitive pressures faced by tech giants as they navigate the rapidly evolving landscape of AI and gaming.
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.
Amy Coleman, Microsoft’s executive vice president
'South of Midnight' producer Compulsion Games and 'Psychonauts' maker Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will be spun off to grow 'Senua' and 'State of Decay 3'.
Asha Sharma, Xbox’s new head
