Microsoft has laid off approximately 4,800 employees, representing 2.1 percent of its global workforce, with the cuts falling hardest on Xbox, which is losing 1,600 staff as part of what its leadership described as the most significant restructure in the division’s history.
Amy Coleman, EVP and Chief People Officer, said the eliminated roles are not being directly replaced by AI, but acknowledged that AI is fundamentally changing how work is performed, with many routine tasks now automatable. The layoffs coincide with Microsoft’s $2.5 billion investment in its newly launched Frontier Company AI deployment unit, continuing a pattern visible across the industry in which headcount reductions are tracking alongside increased AI spending.
Asha Sharma, CEO of Xbox, described the division’s core business as unhealthy, citing margins running three to ten times below comparable platform and publishing businesses. Xbox will flatten its management structure from fourteen layers to a maximum of five, appoint Helen Chiang as Chief Operating Officer with full profit and loss authority, and release studios including Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs to independent or new ownership. Strategic focus will narrow around major franchises anchored by Mojang and King.
The cuts are part of a broader industry contraction, with close to 154,000 tech jobs eliminated in the first half of 2026 across companies including Meta, Amazon, Oracle, and Cognizant. Microsoft said it has redeployed more than 4,000 employees into new roles over the past year as part of its reskilling efforts.
