4,800 Microsoft Roles Axed, With Xbox Losing 1,600 Staff Amid AI Focus and Company Overhaul

Microsoft has announced plans to cut 4,800 jobs worldwide, accounting for approximately 2.1 per cent of its global workforce. The reductions, revealed on Monday, target roles in sales, consulting and the Xbox gaming division as the technology company seeks to realign its resources amid a rapidly evolving industry landscape dominated by artificial intelligence developments.

Of the total, 1,600 positions are being eliminated immediately from Xbox, with another 1,600 reductions scheduled for that division over the remainder of the fiscal year. This follows earlier voluntary separation programmes and previous large-scale adjustments at the firm.

Xbox Division Undergoes Major Overhaul

The Xbox unit is experiencing what chief executive Asha Sharma described in a message to staff as 'the most significant restructure in Xbox history'. Overall, Xbox faces a reduction of 3,200 roles through the fiscal year, equating to roughly 20 per cent of its workforce.

Sharma highlighted that the division 'is not healthy' and has been operating at margins three to 10 times lower than comparable platform and publishing businesses. The changes include spinning off four development studios to allow them to operate independently or with new backing: Compulsion Games, Double Fine Productions, Ninja Theory and Undead Labs.

Consultations are also under way at Arkane Studios. Management structures are being simplified, with layers reduced from 14 to a maximum of five in many cases. The division has faced challenges from competition and softer hardware demand in recent times.

Broader Cuts Hit Sales And Consulting Areas

Reductions beyond Xbox primarily affect commercial sales and consulting teams. In an internal memo, chief people officer Amy Coleman explained that the business must respond to fundamental shifts, stating that 'the way technology is built, deployed, and used is transforming faster than at any point' in her time at the company.

She stressed the need to 'adjust resources and roles and shift how we operate' to maximise impact for customers. Coleman made clear that the positions being removed 'are not being replaced by AI', although she noted that 'AI is changing how work gets done' and that some routine tasks are now open to automation.

Over the past year, the company has redeployed more than 4,000 employees into different roles to support this transition. The adjustments also reflect efforts to create higher-performing teams suited to current priorities.

Studio Changes Aim To Improve Returns

By divesting the four studios, Microsoft intends to concentrate efforts on its strongest performing assets, including the teams responsible for Minecraft and Candy Crush, which will now report directly to Sharma. The studio transitions preserve intellectual property for the affected groups in several instances and come after years of substantial investment in gaming content and acquisitions.

These steps are designed to address under-performance in certain areas while the wider company maintains its focus on long-term growth through technological adaptation. The overhaul follows previous workforce reductions at Microsoft, including around 15,000 positions eliminated across 2025.

Management flattening is expected to improve decision-making and accountability. The moves come as the gaming sector contends with what has been described as its most severe hardware crisis in history.

The cuts form part of Microsoft job cuts aimed at positioning the organisation for sustained success in an industry where customer expectations and technological capabilities continue to advance quickly. Further adjustments across other divisions are anticipated as the company responds to these ongoing changes.