- Microsoft is cutting nearly 5,000 jobs across its Xbox and commercial sales divisions as part of a major restructuring.
- Xbox CEO Asha Sharma stated the business is not healthy and operating at margins 3-10x lower than comparable platforms.
- Sharma cited a severe hardware crisis due to soaring costs, and expects another 1,600 job cuts in the fiscal year.
- Chief people officer Amy Coleman stated the eliminated roles are not being replaced by AI.
- Coleman noted that Microsoft had offered voluntary retirement to 8,750 people in May, with over 30% accepting.
- Xbox is flattening management from 14 layers to no more than five, transitioning four studios to new structures.
- The layoffs are part of a broader tech industry trend with 154,000 people losing jobs in the first half of 2026.
- Xbox CEO Sarah Sharma called the layoffs the most significant restructure in Xbox history.
- Sharma stated, the industry is facing the most severe hardware crisis in its history.
- Microsoft redeployed over 4,000 employees into new roles in the past year, including 500 in the current month.
Microsoft is cutting 4,800 jobs, about 2.1% of its global workforce, with 1,600 layoffs in the Xbox division as part of a significant restructuring. CEO Asha Sharma stated, “Our business today is not healthy,” highlighting that margins are 3-10x lower than competitors.2
The layoffs are part of a broader reorganization to address a severe hardware crisis in the gaming industry, which faces rising costs and intense competition from Sony's PlayStation and Nintendo's Switch. Sharma noted that the company will cut an additional 1,600 jobs over the fiscal year, which began last week.3
In a memo, Sharma emphasized the need to “reset Xbox” and mentioned that the restructuring is the most significant in the division's history. The company will also transition four gaming studios to new management to preserve intellectual property and ongoing projects.
Microsoft's chief people officer, Amy Coleman, stated that the layoffs are not being replaced by AI, but acknowledged that AI is changing how work gets done. The restructuring will flatten management layers from 14 to ideally three, focusing on core strategic pillars like Mojang and King.4
This move is part of a larger trend in the tech industry, which has seen nearly 154,000 job losses in the first half of 2026, with major firms like Meta and Amazon also cutting thousands of positions.
“Xbox CEO Asha Sharma called the layoffs 'the most significant restructure in Xbox history' and said the industry faces the most severe hardware crisis ever. Microsoft offered voluntary retirement to 8,750 employees in May, with over 30% accepting, and has redeployed 4,000 employees into new roles in the past year.”
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