Microsoft’s gaming business faces deep cuts as Xbox reduces management layers and seeks buyers for several game studios.
Microsoft is laying off thousands of employees in a new round of job cuts, with its struggling Xbox division bearing the brunt of the reductions.
On Monday, a week into Microsoft’s 2027 fiscal year, the tech giant said it would eliminate 4,800 jobs, or about 2.1 percent of its global workforce, as part of what it described as a necessary shift in resources in response to the evolving technological landscape.
“The way technology is built, deployed, and used is transforming faster than at any point in my time here,” Amy Coleman, Microsoft’s head of human resources and a 27-year company veteran, wrote in a message to employees.
Xbox Bears the Brunt of Cuts
The cuts are concentrated largely in Microsoft’s business units and Xbox division. Xbox is eliminating approximately 1,600 positions on Monday and plans to cut as many as 1,600 more over the course of fiscal 2027.
“Our business today is not healthy,” Xbox CEO Asha Sharma wrote in a separate message to employees.
Sharma said Xbox’s platform teams are now 40 percent larger than they were at the beginning of the current gaming console generation, even as the player base and total playtime have declined.
Some parts of the business have as many as 14 layers of management, she said. Xbox plans to reduce that number to “no more than five, and where possible, three.”
The restructuring will also see Microsoft divest several Xbox studios. Four studios will be spun off or sold, according to Sharma’s message, and a fifth studio has been asked to begin a process to “review potential strategic options.”
The cuts at Xbox have been expected for some time as the division’s financial performance has deteriorated.
In June, Xbox reported that its profit margin had fallen to 3 percent in fiscal 2026, far below the roughly 30 percent Microsoft expects from its major divisions. Gaming revenue fell 7 percent in the most recent quarter to $5.3 billion, while hardware sales plunged 33 percent after price increases for Series X and S consoles in the United States.
By Bill Pan
