The Microsoft campus in Mountain View, California, on January 26, 2026.
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Microsoft is eliminating about 4,800 jobs — about 2.1% of the company’s global workforce — with its Xbox gaming unit among the hardest hit
“Our business is changing because the world around it is changing,” Amy Coleman, Microsoft’s executive vice president and chief people officer, said in a message to employees on Monday. “The way technology is built, deployed, and used is transforming faster than at any point in my time here.”
While jobs at the company are not being replaced with artificial intelligence, the technology is “changing how work gets done,” Coleman wrote
The changes come as Microsoft has faced pressure to establish itself as a major player in artificial intelligence while companies like Anthropic and OpenAI increasingly tailor their AI tools for business use and productivity. Microsoft, like other cloud companies, has also poured billions into AI infrastructure in recent years and is combating concerns over whether it can generate significant returns on those investments
Monday’s cuts follow several rounds of layoffs and staffing changes across the tech industry over the past year as companies seek to cut personnel costs while ramping up AI spending
Microsoft in April offered voluntary retirement to 7% of its US staff and said on Monday that more than 30% of eligible employees chose to participate. It also laid off around 9,000 workers roughly a year agoand 3% of its workforce in May last year. It plans to spend $190 billion in costs related to infrastructure and data centers in 2026, the company said during its most recent earnings call
Microsoft also said it’s exploring approaches similar to its voluntary retirement program to avoid job cuts when possible
The company plans to cut about 3,200 jobs from its Xbox division throughout the 2027 fiscal year, with 1,600 roles being eliminated today, the company’s Xbox CEO Asha Sharma said in a post on X
The company went on a buying spree beginning in 2018, acquiring multiple video game studios in the hopes that their offerings would steer people away from competing gaming platforms. But that strategy largely hasn’t panned out
“We now find ourselves competing not only with the largest publishers, but also with smaller independent studios,” Sharma wrote. “It is neither possible nor desirable to own every great independent studio.”
The Xbox layoffs also come following a slowdown in video game spending after the pandemic. While the industry has largely recovered from that slump, according to reports from Boston Consulting Group and Bain & Company, console makers are grappling with an ongoing memory shortage that has forced them to raise the prices of their products
Xbox console prices will climb by $100-$150 depending on the model as of August 1, the company said in June. Sharma said “the industry is facing the most severe hardware crisis in history.”
“We must reset Xbox,” Sharma wrote
The company has been betting on its Game Pass game subscription service and studio acquisitions to fuel growth, but those businesses “did not grow at the pace we expected,” Sharma wrote
Microsoft will shed four of its studios as part of its changes: Compulsion Games and Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will transition to new management. Xbox revenue decreased by 5% in the quarter which ended in March, the company said in its most recent earnings report
Sharma said Xbox’s teams are 40% larger than they were when the company’s most recent consoles launched in 2020 despite a shrinking player base
“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,” Sharma wrote
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