Microsoft has announced 4,800 job cuts, about 2.1% of its total workforce, with Xbox absorbing a disproportionate share of the losses in what its new chief executive described as the division’s biggest restructure to date.
More than 1,600 Xbox roles were axed immediately, with a further 1,600 to go over the coming year. Asha Sharma, who recently became Xbox’s chief executive, shared the news in a note to staff posted on X.
“These changes are about a bigger future for Xbox, not a smaller one,” she wrote. “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
Four development studios – Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs – will be spun off rather than shut down. Double Fine and Compulsion will both return to independent management, keeping the intellectual property they developed under Microsoft’s ownership.
Double Fine, acquired in 2019, wrote on X that it was “thankful to everyone at Xbox for seven great years together.” Compulsion, which made action-adventure title South of Midnight, said its immediate priority was supporting its team through the transition.
Separately, Minecraft developer Mojang and Candy Crush developer King will now report directly to Sharma. Analyst Piers Harding-Rolls of Ampere Analysis said the restructuring “underlines Xbox’s vision for its studios and content, which will be more heavily focused on the biggest IP and audiences.”
He noted that Microsoft had acquired a range of studios to bolster its Game Pass subscription service, but had concluded that some would be better operating outside the Xbox structure.
Company-wide, Microsoft’s executive vice president Amy Coleman told employees the cuts reflected an industry in flux. “Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it,” she said. She added that AI was not replacing the lost roles directly, but that it was changing how work gets done.
The announcement follows a bruising stretch for the gaming industry. In 2024, Xbox laid off more than 2,000 staff and closed four studios acquired before its purchase of Call of Duty maker Activision-Blizzard.
Earlier this year, Microsoft had already flagged plans to cut up to 9,000 jobs across the company as it doubled down on AI investment.
