Microsoft cuts 4,800 jobs, hits Xbox hard in gaming reset

Microsoft is cutting 4,800 jobs, hitting Xbox especially hard as it pares back one of its most visible consumer businesses and sharpens its focus on profit. The reduction equals about 2.1% of Microsoft’s global workforce and comes with 1,600 immediate layoffs inside Xbox, plus additional cuts later in the fiscal year.

The gaming overhaul goes beyond headcount. Microsoft said the restructuring of its gaming division will total 3,200 job cuts and include the divestment of up to five studios, a sign that the company is rethinking how much of its future should depend on large game-production bets versus tighter operating discipline. Asha Sharma, who was named executive vice president and CEO of Microsoft Gaming on February 23, said the business is “not healthy” and warned that margins are three to 10 times lower than those of comparable platform and publishing businesses.

That assessment helps explain why Microsoft is moving so aggressively after years of spending. The company completed its $69 billion acquisition of Activision Blizzard on October 13, 2023, bringing Call of Duty, World of Warcraft, Diablo, Overwatch and Candy Crush into Microsoft Gaming. But the promise of scale has not translated into the growth Microsoft expected, and the latest cuts suggest executives are now reassessing the balance between blockbuster studio ownership, subscriptions and hardware economics.

Sharma also described the gaming market as facing a severe “hardware crisis,” as console component costs rise and Xbox continues to chase Sony’s PlayStation and Nintendo’s Switch. That pressure has made the business harder to defend at a time when Microsoft is pouring capital into artificial intelligence and cloud computing, and investors are demanding clearer returns. CNBC said Microsoft’s stock was down 19% in 2026 at the time of the layoffs.

Microsoft tried to separate the job cuts from the AI boom reshaping the wider tech industry. Chief people officer Amy Coleman said the eliminated roles were not being replaced by AI. The company had already offered voluntary buyouts to about 8,750 employees in May, and more than 30% accepted, creating a runway for a larger reduction.

The latest cuts also extend a painful pattern inside gaming. Microsoft Gaming had already cut roughly 650 jobs in September 2024, and industry reporting said the company had eliminated more than 2,500 gaming jobs since the Activision Blizzard deal before this week’s round. The new layoffs show Microsoft is no longer treating gaming as a growth engine at any cost, but as a business that has to justify itself on stricter financial terms.