Microsoft Announces 4,800 Job Cuts in Major Xbox Restructure
The tech giant announces a reduction of 4,800 roles and a historic restructure of its gaming division.
Tech giant Microsoft has announced a reduction of 4,800 jobs, which represents about 2.1% of its global workforce. The company's gaming division, Xbox, is expected to see the most significant impact from these latest layoffs.
Amy Coleman, Executive Vice President at Microsoft, shared the update with employees in an official memo. She explained that the company needs to focus on key areas to better serve customers in a "fast-changing industry."
As part of these changes, more than 1,600 roles at Xbox will be reduced immediately.
Asha Sharma, the newly appointed Chief Executive of Xbox, informed staff that the division is "beginning the most significant restructure in Xbox history".
She also announced that four game development studios—Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs—will be spun off. This decision will lead to another 1,600 roles being reduced at Xbox.
"These changes are about a bigger future for Xbox, not a smaller one," Sharma stated in a note shared on the social media platform X. "History is full of companies that mistake longevity for inevitability. We will not be one of them."
Meanwhile, Coleman highlighted shifting customer needs as the main reason for the company-wide reductions.
"Companies don't get to choose whether their industry changes; they only get to choose whether they change with it," she said.
She added that while Microsoft will not replace these roles with Artificial Intelligence, "what is true is that AI is changing how work gets done".
Challenges in the Global Gaming Industry
This announcement comes during a challenging period for the global gaming sector, which has faced several rounds of layoffs in recent years.
In 2024, Xbox reduced its staff by over 2,000 and closed four studios bought prior to its major acquisition of Activision-Blizzard. Shortly after, Microsoft announced plans to cut up to 9,000 jobs globally to focus more resources on artificial intelligence.
Rising hardware costs have also led major brands, including Microsoft, to increase the prices of gaming consoles and consumer electronics. Many industry experts point to the high demand for AI data centers as a major cause of supply chain pressures.
Sharma said that while she knew the cuts were "painful", there was a "reset" needed across Xbox's games, platforms, and daily operations.
Tech analyst Paolo Pescatore agreed that these steps mark a "major reset" for the company, which still has challenges ahead.
"The challenge is not just cutting costs; it is defining what Xbox stands for in a world where games are moving across console, PC, cloud and subscription platforms," he explained.
New Structure for Independent Gaming Studios
Under the new structure, Minecraft developer Mojang and Candy Crush creator King will report directly to Sharma.
Piers Harding-Rolls, an analyst at Ampere Analysis, stated that this decision "underlines Xbox's vision for its studios and content, which will be more heavily focused on the biggest IP and audiences".
He noted that Microsoft had previously acquired many studios to grow its Game Pass subscription service.
"But the company has now decided that some of these teams and the games they are building would be better suited to sit outside the Xbox organisation," he added, noting that keeping them open is "positive news during a difficult time".
As a result, both Double Fine and Compulsion Games will return to being independent.
Double Fine, which Microsoft acquired in 2019, shared a message expressing they are "thankful to everyone at Xbox for seven great years together".
The studio behind the popular Psychonauts series expressed gratitude for reaching an agreement "which preserves our history and culture, and returns ownership of our games to us".
Both studios will retain full ownership of their intellectual properties (IP), including Compulsion’s upcoming title, South of Midnight.
"Our immediate priority is to support our team throughout this transition period," Compulsion announced, adding that they remain confident in their future.
AI contributed to the creation of this article.