Microsoft Cuts 4,800 Jobs, Eliminates 3,200 Xbox Positions in Major Restructuring

Jul 6, 2026

Microsoft is cutting 4,800 jobs, or 2.1% of its workforce, in a major restructuring. The Xbox division is hit hardest, eliminating 3,200 positions (20% of its staff) and divesting four game studios. Xbox CEO Asha Sharma cited an "unhealthy" business with low margins and a declining player base as reasons for the "reset," which also includes a significant flattening of management.

Xbox restructuring scale

▪Xbox CEO Asha Sharma described the changes as "the most significant restructure in Xbox history."
▪Microsoft is cutting 4,800 jobs on July 6, 2026, representing about 2.1% of its global workforce.
▪The Xbox division will eliminate a total of 3,200 jobs, or 20% of its staff, by July 2027.
▪The Xbox layoffs began with 1,600 job cuts on July 6, 2026, with another 1,600 planned over the following year.

Studio ownership transitions

▪Microsoft is divesting four gaming studios: Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs.
▪Ninja Theory and Undead Labs are being sold to new ownership with funding to complete their current projects.
▪Compulsion Games and Double Fine Productions will return to being independent studios under their original founders.
▪Minecraft developer Mojang and Candy Crush developer King will now report directly to Xbox CEO Asha Sharma.
▪Arkane Studios is reviewing strategic options in consultation with its workers union in France.

Financial performance issues

▪According to Xbox CEO Asha Sharma, the gaming industry is facing "the most severe hardware crisis in its history."
▪Xbox CEO Asha Sharma stated in a memo that the division's business is "not healthy."
▪Xbox's platform teams grew by 40% while its player base and playtime declined.
▪The Xbox division operates at margins 3 to 10 times lower than comparable platform and publishing businesses.

Strategic reset priorities

▪Microsoft has shifted its gaming strategy toward distributing games on multiple platforms rather than relying on console exclusives.
▪Microsoft's Chief People Officer stated the eliminated roles are not being replaced by AI.
▪No publicly announced first-party games are being cancelled as part of the restructuring.

Organizational structure changes

▪Xbox is reducing its management structure from as many as 14 layers to no more than 5.
▪The company plans to reduce vendor spending by 50% and streamline its code base and services.

Leadership appointments

▪Helen Chiang has been promoted to the new role of Chief Operating Officer for Xbox.
▪Dave McCarthy, a 17-year veteran of Xbox, is retiring from the company.