The Biggest Restructuring in Years
Microsoft announced Monday it is eliminating 4,800 jobs — roughly 2.1% of its global workforce — in a sweeping restructuring that hits its Xbox gaming division hardest. The cuts are the latest in a wave of AI-driven layoffs sweeping the tech industry.
Xbox Bears the Brunt
Xbox will lose about 20% of its staff — 3,200 people — with 1,600 cuts effective immediately and another 1,600 expected through fiscal year 2027. Xbox CEO Asha Sharma acknowledged the difficulty: 'I recognize that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day.'
Four Studios Spun Off
In a dramatic shift, four game development studios acquired over the past decade are being separated from Microsoft:
- Double Fine Productions (acquired 2019) — returning to independent ownership - Compulsion Games (acquired 2018) — becoming independent again - Ninja Theory (acquired 2018) — entered terms to join new ownership - Undead Labs (acquired 2018) — also entering new ownership
Arkane Studios, acquired through the $8.1 billion ZeniMax deal, is also exploring strategic options.
Why It's Happening
Microsoft has been the worst performer among megacap tech stocks in 2026, falling 19% year-to-date. Revenue from Xbox gaming, Windows licenses, and Surface devices has been shrinking. Meanwhile, investors are skeptical about Microsoft's AI strategy despite heavy investment.
Analyst Gil Luria of DA Davidson said: 'This is not a business Microsoft needs to be in, or should be in' — referring to Xbox itself.
The company also introduced a voluntary retirement program in April, which more than one-third of eligible employees accepted.
