Microsoft has announced plans to cut 4,800 jobs globally as part of a broader restructuring, with its Xbox gaming division accounting for a significant share of the workforce reduction.

The layoffs represent about 2.1% of Microsoft's global workforce and come as the company continues to streamline operations while adapting to changing market conditions and the rapid evolution of artificial intelligence.

Xbox Faces Major Restructuring

Microsoft's Xbox division will reduce its workforce by approximately 3,200 employees, representing around 20% of the gaming business.

About 1,600 roles are being eliminated immediately, while the remaining reductions will take place throughout the company's 2027 fiscal year.

Xbox Chief Executive Officer Asha Sharma said the phased approach is intended to support a long-term restructuring, with the company aiming to return the business to growth in 2027.

Four Gaming Studios Leave Microsoft

As part of the restructuring, Microsoft is also reshaping its gaming portfolio.

Game developers Compulsion Games and Double Fine Productions will become independent studios once again, while Ninja Theory and Undead Labs are set to move under new ownership.

The company is also reviewing strategic options for France-based Arkane Studios, which joined Microsoft through its acquisition of ZeniMax Media.

AI Reshapes the Business

Microsoft said the job cuts are part of broader organisational changes rather than direct AI-related replacement of workers.

Chief People Officer Amy Coleman said artificial intelligence is changing how work is performed across the company, requiring employees to develop new skills as automation becomes more common.

She added that Microsoft remains focused on helping customers navigate the same transition while continuing to invest in AI capabilities.

Pressure on Microsoft's Growth Strategy

The restructuring comes as Microsoft faces increasing investor pressure over its AI strategy and slowing performance across parts of its business.

While cloud services and LinkedIn continue to deliver growth, the company has experienced weaker performance in Windows licensing, Surface devices and Xbox gaming.

Microsoft has also introduced a voluntary retirement programme for eligible employees in the United States as part of its broader workforce restructuring efforts.