Microsoft resets – Microsoft announced plans to lay off 4,800 employees—2.1% of its workforce—with additional cuts coming as it restructures to reduce costs and reorient around AI. The Xbox changes are the most visible: Xbox CEO Asha Sharma says the company will cut 3,200 roles
Microsoft’s memo landed on staff screens with a stark message: Xbox is being reset. By Monday, the tech giant had confirmed it will lay off 4,800 employees, or 2.1% of its workforce, as part of a broader cost-cutting restructuring that is still unfolding.
The cuts don’t stay in one department. Within the Xbox division, the scale is even more dramatic. In a memo to staffers. Xbox CEO Asha Sharma said Microsoft would be cutting a total of 3. 200 employees—20% of the division—throughout fiscal 2027. The plan also includes spinning off four gaming studios. turning Compulsion Games and Double Fine Productions into independent studios. while Ninja Theory and Undead Labs will be spun off as well.
For workers, the timing is concrete: Sharma’s plan amounts to eliminating 1,600 roles now and another 1,600 in the coming year. Microsoft frames the move as a pivot away from a gaming sector it describes as lagging, and toward artificial intelligence.
This is not the company’s first round of reductions. The Xbox cuts are the latest step in a job-reduction cycle that arrived about a year after Microsoft eliminated 9,000 jobs.
Sharma’s memo makes the rationale feel urgent rather than abstract. “Our business today is not healthy,” she said. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”
She also pointed to how Microsoft has spent time and money trying to recover, even as core performance weakened. “[Microsoft’s] core business weakened, and [they] added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history.”.
The restructuring lands in a tight window of consumer pressure. Just ten days earlier. Microsoft said it would again raise the price on Xbox—up $100 for the 512 GB model and up $150 for the 1 TB model. That followed an earlier round of increases over last year, when Xbox prices were raised by $20 to $70. Microsoft has also recently raised prices for its Surface laptops.
In those consumer hikes, Microsoft used a familiar explanation: AI-fueled memory and storage shortages. The company has blamed the shortages for the additional cost now being pushed to buyers.
The sequence is harder to miss for employees and customers alike: Xbox prices rise, gaming work gets slimmer, and the organization turns further toward AI even as it says its current business is not operating healthily.
In Monday midday trading, shares of Microsoft were down over 1% at the time of this writing. The stock has already fallen nearly 19% this year as of Friday’s closing bell.
Microsoft Xbox layoffs Asha Sharma restructuring 4800 jobs fiscal 2027 20% Xbox cuts gaming studios spin-off Compulsion Games Double Fine Productions Ninja Theory Undead Labs AI shift cost cutting MSFT shares