Microsoft lays off 4,800 employees amid Xbox restructuring and studio spin-offs
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Microsoft lays off 4,800 employees amid Xbox restructuring and studio spin-offs
Microsoft is laying off 4,800 employees, restructuring Xbox, spinning off gaming studios, and reshaping operations as the company says AI-driven workplace changes continue across the business.
MC Tech Desk
July 06, 2026 / 20:01 IST
Microsoft
Microsoft has announced another round of layoffs, eliminating 4,800 jobs, or about 2.1% of its global workforce. The move comes after the company introduced a voluntary retirement programme earlier this year and as it continues restructuring its business amid changes driven by artificial intelligence. The Xbox gaming division will account for a significant share of the workforce reduction and will also spin off four game studios
Microsoft announces 4,800 job cuts
The company said the layoffs are part of an ongoing effort to reshape its operations. In a message to employees, Microsoft’s Chief People Officer Amy Coleman said the pace at which technology is being developed and adopted is changing rapidly, requiring the company to adapt its workforce and business structure
Microsoft had launched its first voluntary retirement programme for eligible US employees earlier this year. According to the company, more than one-third of eligible employees accepted the offer, and similar programmes may be considered in the future to reduce the need for involuntary job cuts
Xbox to reduce workforce by 20%
The Xbox division will eliminate 3,200 positions through fiscal year 2027. Xbox CEO Asha Sharma said 1,600 employees will leave immediately, while the remaining reductions will take place over the next year
The layoffs represent around 20% of Xbox’s workforce. Sharma said the extended restructuring period would allow the company to implement the changes in phases and added that Xbox expects to return to growth in 2027
Four gaming studios to separate from Microsoft
As part of the restructuring, Compulsion Games and Double Fine Productions will become independent companies again. Ninja Theory and Undead Labs are set to move under new ownership. Meanwhile, Arkane Studios is exploring strategic options through discussions with its local works council in France
Microsoft also said it will reduce the size of its commercial business that focuses on customer sales
Microsoft says AI is changing work
Coleman said artificial intelligence is changing how work is performed but clarified that AI is not directly replacing employees. Instead, she said automation is changing routine tasks, making it necessary for workers to build new skills and adapt to evolving roles
Microsoft’s shares have declined 19% so far this year, underperforming other large technology companies. While businesses such as Azure cloud services and LinkedIn have continued to grow, Microsoft has faced weaker performance in Windows licensing, Surface devices and the Xbox gaming business. The company had also cut around 9,000 jobs last year as part of earlier restructuring efforts
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first published: Jul 6, 2026 08:01 pm
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