Microsoft cuts 4,800 jobs in major Xbox restructure

Microsoft has cut 4,800 jobs, equal to 2.1% of its global workforce, with Xbox absorbing more than 3,200 of the losses in what the division calls its most significant restructure to date.

More than 1,600 Xbox roles were cut immediately, while a further 1,600 will go as four game studios move outside the company. Executive vice president Amy Coleman told staff the changes reflect a fast-changing industry rather than a shift toward AI replacing jobs.

Xbox chief executive Asha Sharma, who took over the role earlier this year, framed the cuts as the start of a wider transformation rather than a retreat. She said history is full of companies that mistake longevity for inevitability, adding that Xbox has no intention of becoming one of them.

Coleman said companies cannot choose whether their industry changes, only whether they change with it. She added that Microsoft will not replace the lost roles with AI, though she acknowledged AI is changing how work gets done across the company. The distinction matters for staff facing redundancy, since it separates this round of cuts from a straightforward automation story.

Sharma said on Monday that the cuts were painful but necessary, describing a reset needed across Xbox's entire content portfolio, platform and operations. The scale of the reduction puts Xbox at the centre of Microsoft's wider cost discipline, even as the company continues to expand its AI infrastructure spending elsewhere.

Four Xbox studios will now operate independently following the restructure:

• Compulsion Games, developer of South of Midnight
• Double Fine Productions, maker of Psychonauts
• Ninja Theory
• Undead Labs

Compulsion and Double Fine will retain ownership of their intellectual property after departing the Xbox portfolio. Double Fine, acquired by Microsoft in 2019, described its seven years inside Xbox as productive, adding that the arrangement preserves its history and culture. Compulsion said its immediate priority is supporting its team through the transition, adding that it remains confident in its future.

Neither studio has confirmed whether future titles will still launch on Game Pass, leaving an open question for subscribers who have relied on the service for day-one access to first-party releases. That gap sits alongside the wider restructure as one of the few details Microsoft has not yet addressed publicly.

Minecraft developer Mojang and Candy Crush maker King will now report directly to Sharma, centralising Xbox's biggest franchises under her leadership. Analyst Piers Harding-Rolls of Ampere Analysis said the restructuring underlines a shift toward Xbox's largest intellectual property and audiences, after years spent acquiring smaller studios to bolster the Game Pass catalogue.

He said Microsoft has concluded that some of these teams and titles are better suited to sit outside the Xbox organisation, calling the decision not to close them entirely a positive outcome given the scale of the cuts. The move suggests Microsoft is drawing a firmer line between the franchises it wants to control directly and the smaller studios it is willing to release.

The cuts extend a pattern of upheaval across Xbox. In 2024, Microsoft closed four studios acquired before its purchase of Call of Duty publisher Activision Blizzard, alongside more than 2,000 job losses. Around a year later, the company cut up to 9,000 roles as it expanded billions of dollars in AI spending.

Rising hardware costs have compounded the pressure on the gaming division. Microsoft and other console makers have raised prices on years-old consoles and similar consumer devices, with many pointing to rising demand from AI data centres [link this phrase to /news-article/apple-xbox-price-rises-ai-chips] outstripping available supply. That squeeze has left hardware margins thinner at the same time Xbox is being asked to cut costs elsewhere.

Tech analyst Paolo Pescatore called the changes a major reset for Microsoft, noting further challenges lie ahead. He said cutting costs is not the only task facing Xbox; the division must also define its role as gaming shifts across console, PC, cloud and subscription platforms. That question extends beyond Xbox, since the wider technology sector faces similar tension between AI investment and workforce reductions.

Sharma said the restructure marks the start of a broader transformation across Xbox's content, platform and operations, rather than a single round of cuts. For the roughly 3,200 staff leaving the division and the four studios now charting their own course, the coming months will determine whether that framing holds.