Microsoft is cutting about 4,800 jobs, roughly 2.1% of its global workforce, as the new fiscal year begins. The cuts land hardest on two parts of the company: the commercial sales business and the Xbox gaming division.
Xbox is taking the biggest hit by far. About 1,600 Xbox employees lost their jobs on the day the cuts were announced, and Microsoft says the division will shed a total of 20% of its staff by the end of the fiscal year, with more departures spread out over the coming months.
Xbox CEO Asha Sharma told staff that stretching the cuts over a year creates its own problems but said doing everything at once simply wasn’t realistic.
Alongside the layoffs, Microsoft is restructuring its gaming studio lineup. Compulsion Games and Double Fine Productions, both acquired in the 2010s, are being spun out and will operate independently again.
Ninja Theory and Undead Labs, which joined Microsoft in 2018, are moving to new owners. Arkane Studios, which came over as part of the massive ZeniMax acquisition in 2021, is talking with its French works council about what comes next.
Sharma framed the shakeup as an effort to get Xbox back to growth by 2027.
Amy Coleman, Microsoft’s chief people officer, sent staff a memo explaining the reasoning. She pointed to how fast the technology industry is changing and said Microsoft needs to shift where it puts its people and investment to keep up.
She was careful to note that the eliminated roles are not being replaced by AI directly, while also acknowledging that AI is changing how work gets done and pushing employees to keep learning new skills.
This isn’t Microsoft’s first round of cuts recently. Last year the company eliminated about 9,000 jobs, and earlier this year it ran a voluntary retirement program aimed at giving employees an alternative to layoffs.
Workers whose age plus years of service added up to 70 or more could apply, and the package included extended healthcare coverage, a cash severance, and partial vesting of unvested stock.
READ: Laid-Off Microsoft Workers Told to Ask ChatGPT for Career Support
About a third of the roughly 9,000 eligible employees took the offer, which helped Microsoft keep this year’s cuts smaller than last year’s.
The layoffs come as Microsoft faces pressure from investors worried that AI could eventually undercut the traditional software business the company is built on.
Microsoft’s stock fell 19% in June, its worst month since the dot-com crash, even as the company keeps pouring money into AI infrastructure.
Some parts of the business are doing well, including cloud services and LinkedIn, but areas like Windows licensing, Surface devices, and Xbox have been shrinking.
Microsoft isn’t alone in this. Other major tech companies have made similar moves this year as they try to balance heavy AI spending with investor demands for efficiency.
Meta cut about 8,000 jobs in May, roughly 10% of its workforce, and Amazon, Google, Coinbase, and Block have all made cuts of their own in recent months.
