Microsoft has announced a major shake-up of its global operations, with plans to axe 4,800 jobs – equivalent to around 2.1% of its workforce. The Xbox division is bearing the brunt of the cuts, with over 1,600 roles lost immediately and another 1,600 expected to go in the coming year. This significant reduction in staff marks a major strategic shift for the company as it navigates the increasingly competitive tech landscape.
Amy Coleman, Microsoft's executive vice president, told employees that the firm needs to focus on areas that deliver real value to customers in today's fast-changing industry. At Xbox, chief executive Asha Sharma described the restructure as "the most significant" in its history. Four game development studios – Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab – will be spun off as part of this streamlining effort.
Sharma acknowledged that these decisions are painful but stressed that they're designed to ensure Xbox's long-term success. She highlighted the centralisation of key gaming franchises under her leadership, with developers Mojang (Minecraft) and King (Candy Crush) now reporting directly to her. Meanwhile, Microsoft's increasing investment in artificial intelligence will undoubtedly transform operational efficiencies – although it won't directly replace lost jobs.
The move comes amid a tough period for the wider gaming sector, which has seen numerous job cuts and studio closures recently. Xbox itself made significant layoffs in 2024, affecting over 2,000 staff and leading to the closure of several studios acquired before its massive purchase of Activision-Blizzard. Furthermore, Microsoft had previously signalled plans to cut up to 9,000 jobs as part of a broader strategic pivot towards AI development.
Rising hardware costs are also putting pressure on industry players like Microsoft, with older consoles and devices increasingly priced up due to escalating demand for AI data centres. This is driving up component costs and outstripping supply – prompting companies to adapt their business models accordingly.