Microsoft is cutting 4,800 jobs, about 2.1% of its global workforce, and Xbox will absorb a large share of the reduction.

The company laid off 1,600 Xbox workers on Monday, July 6. It expects another 1,600 cuts later this fiscal year, raising Xbox’s total to roughly 3,200 roles.

Xbox CEO Cites Margin Gap

Xbox CEO Asha Sharma took over the gaming unit in February after Phil Spencer’s retirement. She told staff the division’s economics no longer hold up.

“Our business today is not healthy.”
Asha Sharma, Xbox

Sharma said Xbox’s margins run three to ten times lower than comparable platform and publishing businesses. She blamed a worsening hardware crisis as console component costs climb, intensifying competition with Sony’s PlayStation and Nintendo’s Switch.

Sony also plans to end physical disc production in January 2028. The shift mirrors a broader industry pivot toward digital distribution that Xbox appears to be following.

Microsoft is also spinning off four studios it once acquired. Compulsion Games and Double Fine Productions will go independent, while Ninja Theory and Undead Labs will move to new owners.

The moves unwind part of the Activision Blizzard portfolio Microsoft built through its $69 billion deal three years ago.

Cuts Follow Buyout Program

Chief People Officer Amy Coleman said fast-changing technology drove the decision. She noted Microsoft offered buyouts in April, and more than a third of eligible employees accepted them.

The reduction follows a broader trend. Tech and finance jobs have fallen at a steady monthly pace in 2026 as companies lean further into AI.

The gaming reset lands as Microsoft shares have slid roughly 19% over the past six month. Investors are weighing whether heavy AI spending is paying off amid broader pressure on tech stocks.

Xbox’s restructuring runs through fiscal 2027. That leaves open how much further the division will shrink before Sharma’s reset takes hold.

Source: BeInCrypto