Microsoft cut about 4,800 jobs on Monday. That’s 2.1% of its global workforce. Xbox and commercial sales took the biggest hits.
Xbox alone lost 1,600 staff. Xbox CEO Asha Sharma called it “the most significant restructure in Xbox history.” Her memo to employees was blunt: “Our business today is not healthy.” She said Xbox operates at margins 3 to 10 times lower than comparable platform and publishing businesses.
Game Pass and other bets didn’t grow fast enough. Now the industry faces what Sharma described as “the most severe hardware crisis in its history.” Her conclusion: “We must reset Xbox.”
As part of the shakeup, Microsoft is cutting management layers from 14 down to no more than five, ideally three. Four studios are being restructured — Compulsion Games and Double Fine return to independent status, while Ninja Theory and Undead Labs get new ownership with fresh funding.
The broader context? Microsoft launched its Frontier Company business unit last week with a $2.5 billion commitment to enterprise AI deployments. Job cuts and AI spending are moving in tandem across the industry.
Amy Coleman, Microsoft’s chief people officer, said the eliminated roles “are not being replaced by AI.” But she acknowledged that “AI is changing how work gets done” and some daily tasks can now be automated. For people who just lost their jobs, the distinction doesn’t mean much.
These layoffs are part of a bigger wave. Close to 154,000 people lost tech jobs in just the first half of 2026. Meta, Oracle, Amazon, and Cognizant are all cutting workers too.
Microsoft says it redeployed over 4,000 employees into new roles in the past year, including 500 this month alone. Whether that keeps pace with the cuts remains to be seen.
