Microsoft axes about 4,800 jobs, including major cuts to Xbox

In a significant restructuring effort, Microsoft has revealed plans to cut approximately 4,800 jobs, which amounts to about 2.1% of its global workforce. The Xbox gaming division is set to experience some of the most substantial reductions. Amy Coleman, the company’s executive vice president and chief people officer, emphasized in a communication to employees that the evolving nature of technology necessitates these changes. "Our business is changing because the world around it is changing," she stated. While these job cuts are not being directly replaced by artificial intelligence, Coleman acknowledged that AI is transforming how work is conducted. This strategic shift comes at a time when Microsoft is under pressure to solidify its position in the AI landscape, as competitors like Anthropic and OpenAI develop AI solutions tailored for business and productivity. The layoffs are part of a broader trend in the tech industry, which has seen numerous companies reducing staff to manage costs while investing heavily in AI technologies. Earlier this year, Microsoft offered voluntary retirement packages to 7% of its U.S. workforce, with over 30% of eligible employees opting in. This follows significant layoffs last year that impacted around 9,000 workers and 3% of its workforce in May. Microsoft plans to streamline its Xbox division, targeting a reduction of about 3,200 jobs throughout the fiscal year 2027, with 1,600 positions eliminated immediately, according to Xbox CEO Asha Sharma. The company has been actively acquiring gaming studios since 2018 to enhance its offerings and compete with rival platforms, but this strategy has not yielded the anticipated results. "We now find ourselves competing not only with the largest publishers, but also with smaller independent studios," Sharma remarked. The job cuts come amidst a downturn in video game spending following the pandemic, although the industry is showing signs of recovery. However, ongoing supply chain issues, particularly a memory shortage, have led to price increases for Xbox consoles, with costs expected to rise by $100 to $150 starting August 1. Sharma noted that the gaming industry is currently facing unprecedented hardware challenges, stating, "We must reset Xbox." The company has been relying on its Game Pass subscription service and studio acquisitions for growth, but these segments have not expanded as quickly as hoped. As part of the restructuring, Microsoft will also be shedding four of its game studios, with Compulsion Games and Double Fine Productions becoming independent, while Ninja Theory and Undead Labs will undergo new management. In the latest earnings report, Xbox revenue fell by 5% for the quarter ending in March. Despite this, Sharma assured that investment in Xbox would remain robust, advocating for a more focused and disciplined approach to ensure its success in the gaming market.