Microsoft is cutting 4,800 jobs, representing about 2.1 percent of its global workforce, with a significant number of layoffs targeting its Xbox video game division. The reductions include 1,600 Xbox employees, and the company plans further cuts later this year as part of a broader reorganization aimed at "resetting" Xbox amid intensifying competition.
Xbox CEO cites low margins and hardware crisis
In a memo to staff, Xbox CEO Asha Sharma, who took over the gaming division earlier this year, stated, "Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses." She attributed the struggles to a severe "hardware crisis" in the industry, as costs for console components continue to rise. Xbox competes directly with Sony's PlayStation and Nintendo's Switch.
Sharma indicated that an additional 1,600 job cuts are expected over the course of the fiscal year that began last week. The company is also spinning off four video game development studios that were previously acquired by Microsoft.
Broader Microsoft layoffs and voluntary buyouts
The Xbox cuts are part of wider layoffs across Microsoft. Amy Coleman, the company's chief people officer, linked the reductions to unspecified changes in customer needs. In a blog post, Coleman clarified, "I also want to be direct that the roles eliminated today are not being replaced by AI."
These layoffs follow voluntary buyout offers that Microsoft extended to approximately 8,750 employees in May. According to Coleman, more than 30 percent of eligible workers accepted those voluntary retirement offers.
Impact on the gaming industry
The restructuring underscores the challenges facing the gaming sector, particularly in console hardware. Soaring component costs have squeezed margins, prompting Microsoft to streamline its gaming operations. The spin-off of four studios signals a shift in strategy, as the company seeks to focus resources on core areas.
As of Monday, the layoffs had already affected 1,600 Xbox workers, with more reductions anticipated. Microsoft's global workforce stands at roughly 228,000 employees, making the 4,800 cuts equivalent to 2.1 percent of its total headcount.
