Microsoft cuts 4,800 jobs as Xbox undergoes major restructuring

The Xbox division bears the brunt of the reduction, accounting for 1,600 of the total layoffs. Asha Sharma, CEO of Xbox, characterized the decision as a response to unsustainable margins—noting they currently sit three to ten times lower than those of comparable platform businesses. To reset the brand, the company is flattening its management hierarchy from 14 layers to five or fewer, while spinning off studios like Compulsion Games and Double Fine Productions into independent entities.

Amy Coleman, Microsoft's chief people officer, stated that while AI is not directly replacing these specific roles, the technology is fundamentally altering how work is performed. Despite the company’s efforts to redeploy staff into new positions, the cuts coincide with a broader trend of Big Tech firms prioritizing AI investment over headcount. The restructuring marks a pivot toward core assets like Mojang and King, moving away from broader creative bets that failed to achieve required scale.