- Microsoft is cutting 4,800 jobs (~2% of workforce) and explicitly denies AI as the cause, citing an internal memo from Chief People Officer Amy Coleman.
- The layoffs will primarily affect the commercial sales division and Xbox gaming business.
- Microsoft will provide severance packages, healthcare benefits, and career transition assistance to affected employees, and a voluntary retirement program earlier this year helped reduce the scale of layoffs.
- Xbox president Asha Sharma called the Xbox overhaul "the most significant restructure in Xbox history," involving 3,200 role reductions across FY27, with 1,600 eliminations immediately and four studios leaving Xbox.
- Sharma described Xbox's business as not healthy, with margins 3 times lower than comparable platforms, and cited the most severe hardware crisis in industry history as a reason to reset.
- The workforce reduction reflects a broader trend among major tech companies investing heavily in AI while seeking to control costs and improve efficiency.
- Coleman explained the restructuring aims to make Microsoft more agile by reducing complexity and empowering employees through new technologies, while the company continues hiring in strategic areas.
- The job cuts aim to reduce costs in the Xbox division, which has been "struggling."
Microsoft is cutting 4,800 jobs globally, representing about 2.1% of its workforce, as part of a significant restructuring effort. The layoffs will primarily affect the Xbox division, which is undergoing its largest overhaul in history, with approximately 3,200 roles eliminated.12312
In an internal memo, Amy Coleman, Microsoft's Chief People Officer, emphasized that the layoffs are not a direct result of artificial intelligence replacing jobs, stating, "These changes are not about reducing the number of people doing work because AI can do it instead." Instead, the company aims to streamline operations and reduce management layers, which currently can reach up to 14 layers in some areas.
The Xbox division has been struggling, with CEO Asha Sharma describing the business as "not healthy" and stating that the company must "reset Xbox". The restructuring will involve divesting five major development studios and reducing management layers to no more than five, with a goal of returning to growth by 2027.789
Despite the cuts, Microsoft plans to continue hiring in strategic areas and will provide severance packages and career transition assistance to affected employees. The company has also noted that a voluntary retirement program helped reduce the scale of layoffs. "Our business is changing because the world around it is changing," Coleman wrote, highlighting the need for adaptation in a rapidly evolving technology landscape.56
The layoffs come amid a broader trend in the tech industry, where companies are facing challenges from rising hardware costs and shifting consumer demands, leading to significant job reductions across the sector.
“Xbox chief Asha Sharma admitted the division's business is 'not healthy' and said the cuts are part of the 'most significant restructure in Xbox history.' Affected employees will receive severance packages, healthcare benefits, and career transition assistance, with a voluntary retirement program already reducing the scale of layoffs.”
DW.com
