Microsoft Announces New Wave of Layoffs, Reduces Workforce
Microsoft has announced another round of layoffs, cutting approximately 4,800 jobs, or about 2.1% of its global workforce. The company's Xbox division will be heavily affected, with around 20% of its staff expected to be reduced over the next few years. As part of the restructuring, Microsoft will also separate four of its gaming studios into independent businesses or new ownership. The company says the layoffs are part of a broader business transformation and are not the result of AI replacing employees, although it acknowledges AI is changing how work is done. The announcement comes amid a broader wave of job cuts across the tech industry, with thousands of layoffs reported at major technology companies throughout 2026.
Microsoft has confirmed another significant round of workforce reductions, announcing plans to eliminate approximately 4,800 positions worldwide. The cuts represent around 2.1% of the company's global workforce and are part of a broader effort to adapt to changes in the technology industry.
In an internal message to employees, Chief People Officer Amy Coleman explained that the company is reshaping its business to keep pace with the rapid evolution of technology. She noted that advances in software development, deployment, and usage are transforming the industry faster than ever before, making organizational changes necessary.
Xbox Division Faces Major Restructuring
The company's gaming business will be among the most affected. Microsoft plans to reduce Xbox staffing by about 20%, with roughly 1,600 positions eliminated immediately. Overall, around 3,200 Xbox-related roles are expected to be cut by the end of the company's 2027 fiscal year.
Xbox executive Asha Sharma acknowledged the challenges facing the gaming division, stating that the restructuring is driven by business realities rather than employee performance. According to Sharma, Microsoft believes these changes will help position Xbox for long-term growth as the gaming industry continues to expand globally.
Gaming Studios to Operate Independently
As part of the restructuring, Microsoft is also changing the ownership structure of several game development studios. Compulsion Games and Double Fine Productions are expected to become independent companies again after spending years under Microsoft's ownership. Meanwhile, Ninja Theory and Undead Labs are set to seek new ownership opportunities following their acquisition by Microsoft in 2018.
Layoffs Not Attributed to AI Replacement
Coleman emphasized that the affected positions are not being eliminated because artificial intelligence is directly replacing employees. However, she acknowledged that AI is transforming how work is performed by automating certain routine tasks. She encouraged employees to continue developing new skills as workplace demands evolve alongside emerging technologies.
Challenges Continue for Microsoft's Gaming Business
Microsoft significantly expanded its gaming portfolio over the past several years, highlighted by its $69 billion acquisition of Activision in 2023. Despite these investments, the Xbox brand has continued to face strong competition from rival gaming platforms, making it difficult to strengthen its position in the console market.
Earlier this year, Microsoft appointed Asha Sharma to oversee the Xbox business. The division has also faced additional challenges, including ongoing hardware supply issues and broader economic pressures affecting the technology sector.
Tech Industry Layoffs Remain High in 2026
Microsoft's announcement reflects a broader trend across the technology industry, where companies continue to reduce costs and reorganize operations. Industry tracking data indicates that more than 160,000 technology jobs have already been eliminated during the first half of 2026. Major companies, including Meta, Oracle, Amazon, Cisco, and Wix, have also announced substantial workforce reductions this year.
Current estimates suggest total tech layoffs could exceed 320,000 by the end of 2026, significantly higher than the industry's reported job cuts in 2025.
This article is based on publicly available information and company announcements. Figures and plans may change as Microsoft provides further updates.