Microsoft cuts – Microsoft is eliminating 4,800 roles—2.1% of its workforce—with its Xbox division taking the biggest hit as the company downsizes and plans to spin out four gaming studios. The reductions include 3,200 Xbox jobs through fiscal year 2027, and 1,600 roles axed i
On a Monday that brought immediate payroll changes to thousands, Microsoft also laid out a second, longer shock: 4,800 jobs would be eliminated companywide, and Xbox would be reshaped around cuts and planned spinouts.
The message came from inside Microsoft before the day was done. Amy Coleman. Microsoft’s chief people officer and a 27-year company veteran. told employees that the company would eliminate 4. 800 jobs. representing 2.1% of its workforce. She wrote that “The way technology is built. deployed. and used is transforming faster than at any point in my time here. ” in a Monday message to employees.
For Xbox employees, the timeline was even sharper. Xbox CEO Asha Sharma wrote that Xbox would cut 3,200 people through fiscal year 2027, with 1,600 roles being axed on Monday. The additional 1,600 exits, she wrote, would come on top of the companywide total of 4,800 leaving immediately.
Sharma acknowledged the pace would be difficult. writing. “I recognize that a year-long restructuring creates additional challenges. ” and adding. “Unfortunately. it is not possible to make all the necessary changes in a single day.” She also warned employees that the cuts amount to 20% of Xbox employees leaving. “according to a person familiar with the matter. ” who asked not to be named to discuss internal changes. Sharma added, “We will return to growth in 2027.”.
Beyond layoffs, Microsoft’s Monday decisions point toward a structural shift in how it wants to run parts of its gaming business. Coleman said that as part of the announced changes, four gaming studios would be spun out of Microsoft. Sharma’s note specified what that means for individual teams.
Compulsion Games and Double Fine Productions—studios Microsoft acquired in the 2010s—will become independent again, Sharma wrote. Ninja Theory and Undead Labs. which joined Microsoft in 2018. “have entered terms to join new ownership.” France-based Arkane Studios. which arrived at Microsoft through the $8.1 billion ZeniMax Media acquisition in 2021. is in touch with its works council regarding strategic options.
In the same span of messages, the company connected the reorganizations to an era defined by artificial intelligence—while rejecting a simpler narrative that AI is directly replacing workers.
Coleman wrote that “Decisions like these are never easy. ” and added. “you have my commitment that we are constantly looking for ways to reduce the need for job eliminations.” She also addressed why Microsoft is making these changes now. writing that while much of Wall Street’s concerns about Microsoft are tied to the company’s AI position and CEO Satya Nadella’s failure to lay out a coherent strategy for its approach to developing models. agents and other services. “AI isn’t replacing laid-off workers.”.
Coleman said. “At the same time. what is true is that AI is changing how work gets done. ” and that “Some of the tasks we do every day can now be automated.” She urged employees to keep learning. keep building new skills. and keep adapting as the work evolves. saying that customers are navigating the same shift and “are counting on us to help them through it.” She concluded. “We can’t do that well unless we’re doing it ourselves.”.
Her messages landed as Microsoft’s broader performance has come under pressure. The company has been the worst performer among megacap tech stocks so far in 2026. falling 19% as of Friday’s close. as investors fear generative AI models might displace wide swaths of enterprise software. Microsoft’s own AI models and services have not yet become big hits.
That gap between ambition and outcomes is part of why some business areas appear to be losing momentum even as cloud services and LinkedIn have been accelerating in recent quarters. Microsoft is lagging in other areas. including Windows operating system licenses. Surface devices. and the Xbox gaming unit. where revenue has been shrinking.
The Xbox cuts also come after earlier rounds of job cuts across Microsoft. Last year, Microsoft conducted several rounds of layoffs, including one that cut 9,000 jobs.
The company’s Monday moves follow another experiment in reducing headcount through less direct means. In April, Microsoft introduced a one-time voluntary retirement program, a first for the company. Coleman wrote that the effort targeted U.S. employees at the senior director position and below. Over one-third of eligible employees accepted the offer, and Microsoft “will continue exploring similar approaches in the future.”.
Taken together—immediate Xbox exits. a broader companywide reduction. and studio spinouts—Monday’s announcement reads like more than cost cutting. It is also a choice about what Microsoft wants to keep inside the company. what it wants to reshape through independence. and how quickly it is willing to restructure when pressure mounts in a market that is moving toward AI.
Microsoft says it expects to return to growth in 2027. The people asked to leave on Monday, and the teams told they will be reduced over the next year and more, will measure that promise against the speed of change now unfolding.
Microsoft layoffs 4 800 jobs Xbox downsizing Asha Sharma Amy Coleman gaming studios spin out Compulsion Games Double Fine Productions Ninja Theory Undead Labs Arkane Studios ZeniMax acquisition AI and layoffs