REDMOND: Microsoft has announced plans to eliminate around 4,800 jobs worldwide, representing about 2.1% of its global workforce, as the technology giant restructures parts of its business, including its Xbox gaming division.
The company confirmed the cuts on July 6, 2026. Microsoft said the changes would mainly affect its Commercial and Xbox organizations as it adjusts resources, roles and operations in response to a rapidly changing technology industry.
Reuters reported that Microsoft’s gaming restructuring will involve around 3,200 Xbox job reductions, including approximately 1,600 roles eliminated immediately. Further reductions are expected during the current fiscal year.
Xbox CEO Asha Sharma, who was officially appointed to lead Microsoft Gaming earlier in 2026 and now holds the title CEO Xbox, described the overhaul as a major reset of the business.
According to a memo reported by Business Insider and AP, Sharma said the Xbox business was “not healthy” and was operating at profit margins significantly below those of comparable platform and publishing companies.
In her employee memo, Sharma said Xbox had invested in areas such as Game Pass, multiplatform distribution and a broader content portfolio. However, she said those businesses did not grow as quickly as expected.
The company has also faced stronger competition from Sony’s PlayStation and Nintendo, while rising hardware costs have added further pressure to the gaming business. Reuters reported that Microsoft has increasingly shifted toward distributing games across more platforms instead of relying only on console-exclusive titles to support Xbox hardware sales.
The company’s official announcement said the move is intended to preserve the studios’ intellectual property and ongoing projects.
Reuters reported that Compulsion Games and Double Fine Productions will become independent studios. Ninja Theory and Undead Labs are also set to move to new ownership arrangements, while management at Arkane Studios in France has begun consultations over possible strategic options.
Microsoft Chief People Officer Amy Coleman said the company is changing because technology, customer needs and business models are evolving rapidly. She said Microsoft must adjust its structure and priorities to remain competitive.
However, Coleman explicitly said the jobs being eliminated are not being directly replaced by artificial intelligence.
At the same time, she acknowledged that AI is changing how work is performed and that some routine tasks can now be automated.
Microsoft said it has attempted to reduce the need for layoffs through other measures.
According to the company, more than 4,000 employees were moved into new roles during the past year, including another 500 in the latest month. Microsoft also said more than 30% of eligible workers participated in a recent voluntary retirement program.
The company said the latest restructuring is aimed at focusing employees, investment and resources on areas it considers most important for future growth. Microsoft also warned that further organizational changes could come as other parts of the business adapt to changing market conditions.
