Microsoft axes nearly 5K jobs

Microsoft has eliminated 4,800 positions, a reduction equal to roughly 2.1% of its worldwide headcount. The largest share of those job losses falls on Xbox, where the company is carrying out what leadership has described as the biggest reorganization in the gaming unit’s 25-year history.

In a message to employees, newly appointed Xbox CEO Asha Sharma said the business is not in good shape. She pointed to weak economics inside the division, saying Xbox runs at margins far below comparable businesses and has lost 64 cents for every dollar invested in its studio operations.

Xbox accounts for most of the reductions

While the cuts span Microsoft more broadly, Xbox is absorbing the deepest impact. About 3,200 gaming roles are expected to be removed by the middle of 2027, representing around one-fifth of the division’s workforce. Of that total, 1,600 jobs were cut immediately on Monday, with the rest expected to be phased in during the fiscal year.

• Total jobs cut at Microsoft: 4,800

• Share of global workforce affected: 2.1%

• Estimated Xbox-related reductions: about 3,200 roles

• Approximate size of Xbox workforce reduction: 20%

• Immediate Xbox layoffs announced Monday: 1,600

Studio network also faces major changes

The shake-up extends beyond staffing numbers and into Microsoft’s game development structure. Several studios tied to Xbox are being reassessed or moved out of the company’s direct control.

Double Fine and Compulsion are set to become independent. Ninja Theory and Undead Labs are reportedly being steered toward potential buyers. Arkane, meanwhile, has been placed under review as Microsoft evaluates its future.

A dramatic turn after years of expansion

The restructuring comes less than three years after Microsoft closed its $69 billion acquisition of Activision Blizzard, a deal that remains the biggest takeover in gaming history. That purchase had symbolized Microsoft’s aggressive push to expand its gaming footprint, but the latest move signals a clear change in direction.

According to the report, Microsoft now appears to be concluding that its acquisition-driven strategy left the gaming business too large and too costly to operate efficiently. After years spent building a broader studio empire, the company’s new approach is increasingly focused on trimming it back.

Broader investor concerns form the backdrop

The layoffs are happening as Microsoft faces heightened pressure from the market. The company’s stock is said to be down 19%, lagging other major technology names. At the same time, investors are reportedly worried that advances in AI could begin to weaken parts of Microsoft’s enterprise software business.

Against that backdrop, the job cuts and studio changes suggest a wider effort by Microsoft to reset operations, improve profitability, and respond to growing pressure on multiple fronts.