Microsoft’s Xbox gaming division will cut 3,200 jobs in what CEO Asha Sharma has called the most significant restructure in Xbox history. Sharma detailed the changes in an internal memo to staff titled “Resetting Xbox,” sent on Monday.
Of the projected layoffs, 1,600 took effect immediately, with the remainder set to occur over the rest of fiscal 2027. The Xbox cuts are part of a broader workforce reduction at Microsoft that is expected to affect about 2% of its 228,000 employees.
Xbox 3200 Jobs Cut Business Reality
Xbox will cut 3,200 jobs from its gaming division, representing approximately 20% of its total gaming workforce. The broader Microsoft reductions cover about 4,800 jobs in total, affecting roughly 2.1% of the company’s global headcount of approximately 228,000 employees, with commercial operations among the hardest-hit areas.
Sharma acknowledged the difficulty of a phased approach, writing, “I recognize that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale.“
Sharma did not mince words about what brought Xbox here. The division has been posting operating margins three to ten times lower than comparable platform and publishing businesses, and the gaming industry is now facing what she called the most severe hardware crisis in its history.
Growth from Game Pass and multi-platform efforts came in below expectations. Headcount went up; results did not follow. Sharma put it plainly, “Our business today is not healthy.“
Four Xbox Studios Leave Microsoft
Four game studios will leave Microsoft as part of the overhaul. Compulsion Games and Double Fine Productions will be spun out to their respective management teams and will operate going forward as independent studios. Each will hold on to its intellectual property, existing game catalog, and funding for future projects.
Ninja Theory and Undead Labs have entered into terms to operate under new ownership, with funding in place to complete their current projects. Arkane Studios, based in Lyon, France, is on a separate path.
Under French labor law, the studio’s management has started required consultation with its Works Council to review strategic options. No outcome for Arkane or its project Blade has been announced, and that process is still underway.
Xbox Leadership Overhaul
Helen Chiang has been appointed Xbox’s first-ever Chief Operating Officer, taking on profit and loss responsibility covering content, hardware, platform, and services. Major properties, including King, the maker of Candy Crush, and Mojang Studios, the maker of Minecraft, will now report directly to Sharma.
Sharma has been open about the management structure she inherited, calling it unwieldy. At its worst, some matters at Xbox currently pass through 14 layers of management before anything gets resolved.
Sharma wrote, “That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset Xbox, we will simplify.” On the specific target, she added, “We will reduce management layers to no more than 5, and where possible, 3.“
Microsoft On AI And Xbox’s Future
Microsoft Chief People Officer Amy Coleman addressed staff in a separate message to clarify where artificial intelligence fits into the restructuring. Coleman wrote, “I also want to be direct that the roles eliminated today are not being replaced by AI.“
“At the same time, what is true is that AI is changing how work gets done. Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves.“
Sharma closed her memo with a statement about where Xbox is headed. “These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before.“
On investment, she wrote, “This year, we’ll invest as much in XBOX as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates.“
