Microsoft lays off 4,800 workers, Xbox faces historic restructuring

Microsoft announced the elimination of 4,800 jobs (2.1% of its global workforce), with the Xbox division bearing the brunt of 3,200 cuts. Asha Sharma, CEO of Xbox, stated this is “the most significant restructuring in the history of Xbox” and acknowledged the business is “not healthy” Source: abc.es.

The cuts

Of the 3,200 Xbox layoffs, 1,600 are immediate and the rest will occur during fiscal year 2027 Source: elespanol. The reductions affect studios including Activision, Bethesda, Blizzard, King, and Mojang. Amy Coleman, Microsoft's HR chief, said the cuts are driven by changing customer needs and that AI will not directly replace the eliminated roles Source: heraldomx.

Studio shake-up

Four studios are leaving Xbox: Compulsion Games and Double Fine return to independent status with their IP; Ninja Theory and Undead Labs will be acquired by new owners. Arkane in France is under strategic review Source: lavanguardia. Impact on id Software and ZeniMax Online Studios has been severe: id Software laid off 136 employees, and ZeniMax lost up to half its team for The Elder Scrolls Online Source: elespanol, infobae.

Why it happened

Sharma attributed the crisis to low profit margins (3–10 times below competitors), a failed Game Pass growth strategy, and the “most serious hardware crisis in history” Source: excelsiormx. Microsoft spent $69 billion on Activision Blizzard but saw Game Pass subscribers fall to 30 million, far below the 77 million target Source: infobae. The company is pivoting more investment to AI, with $190 billion in capital expenditure planned for 2026 Source: elcaribedr.