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

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