/Technology

Microsoft announced on Monday that it is cutting roughly 4,800 jobs worldwide, about 2.1% of its total workforce. The number alone would be news, but what really stands out is where these cuts are landing. Two thirds of the eliminated positions belong to the company's gaming division, hitting Xbox directly at a time when the business had already been struggling for a while. According to Asha Sharma, who recently took over leadership of Microsoft's gaming division, around 1,600 people were told today that this would be their last day at the company. The expectation is that total cuts at Xbox will reach 3,200 by the end of fiscal year 2027, making this the biggest restructuring in the division's history. On top of the layoffs, four studios are being moved out from directly under the Xbox umbrella to new management, a sign that the company wants to simplify how it runs its gaming portfolio. The tone of the internal communication left little doubt about how serious the situation is. Sharma was blunt in telling employees that the business today is not healthy, and that Xbox's margins run three to ten times lower than comparable platform and publishing businesses. That is a fairly raw admission coming from inside one of the biggest tech companies in the world, and it helps explain why the restructuring went this deep. Part of the problem, according to Xbox itself, is tied to what the company describes as a hardware crisis. The cost of console components has soared in recent years, squeezing margins that were already thin. This is happening right as competition with Sony's PlayStation and Nintendo's Switch remains fierce. Notably, Sony itself announced last week that it will stop producing physical discs for its consoles, moving fully to a digital-only model, a decision that drew criticism for limiting consumers' ability to resell games, though Sony points to a long-term shift in consumer preference toward digital as its justification. The Xbox cuts didn't happen in isolation. Microsoft's commercial division was also affected, according to an internal memo signed by Amy Coleman, the company's executive vice president and chief people officer. Coleman wrote that Microsoft is still early in this transformation and made clear that other parts of the business should expect similar changes ahead, suggesting this round of cuts won't be the last. To put things in perspective, it's worth remembering that Microsoft already cut more than 15,000 jobs in 2025, spread across two rounds in spring and summer, its largest reduction in more than a decade. Even so, executives were quick to point out that this time they tried to soften the direct impact of the layoffs. Over the past year, the company says it has redeployed more than 4,000 employees into new roles within the organization, including another 500 just this month. There was also a voluntary retirement program, the first of its kind at Microsoft, in which about 30% of the roughly 8,750 eligible U.S. employees chose to accept the buyout on their own. The backdrop to all of this is the massive investment Microsoft, like nearly every other big tech company, is pouring into artificial intelligence. Industry-wide AI capital spending is expected to top $700 billion this year, and that is pushing companies to show a fast financial return on the money they're spending. It's no coincidence that these cuts come right after the launch of Frontier Company, a new Microsoft business unit focused on enterprise AI deployments, backed by a $2.5 billion investment. It's a pattern repeating across several companies this year, cutting jobs while pouring money into automation and AI tools at the same time, an equation that has sparked debate over whether the technology is actually delivering the productivity gains it promised. Financial pressure is also coming from the market. Microsoft's stock fell nearly 23% in the first six months of 2026, its worst first-half performance since 2022. All told, the company has lost roughly $1.2 trillion in market value over the past nine months, which helps explain the urgency to rein in operating costs even as spending on AI infrastructure keeps hitting new records. These Microsoft cuts aren't an isolated case. In just the first half of 2026, around 154,000 people have already lost their jobs in the tech sector, with companies like Meta, Oracle, Amazon, and Cognizant also announcing mass layoffs. It's a sign that the industry as a whole is going through a deep reorganization, driven both by pressure from investors and by the race to integrate artificial intelligence into nearly every part of the business. For anyone following the gaming world, this moment feels particularly delicate. Xbox has been trying to reposition itself for a while now, leaning hard into Game Pass and cross-platform games, but the internal numbers revealed by Sharma show that transition hasn't solved the business's profitability problem. It remains to be seen whether the restructuring announced now, with studios changing hands and thousands of positions eliminated, will actually put Microsoft's gaming division on a healthier path, or whether this is just another chapter in a reinvention that is still far from over. Source: https://www.kron4.com/news/technology-ai/microsoft-cutting-thousands-of-jobs-mostly-at-xbox/