4,800 Roles Eliminated in Sweeping Microsoft and Xbox Reorganization 

Microsoft is cutting 4,800 jobs, which represents about 2.1 percent of its total workforce. The Xbox gaming division will absorb a major portion of these layoffs. In a company memo, executive vice president Amy Coleman explained that Microsoft must prioritize areas that deliver value for customers within a fast-changing industry. 

The sweeping organizational shift eliminates more than 1,600 roles at Xbox immediately, with another 1,600 positions disappearing over the coming year. Asha Sharma, the newly appointed chief executive of Xbox, described the move as the most significant restructure in Xbox history. As part of this overhaul, Microsoft will spin off four game development studios: Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs. Sharma emphasized that the changes aim to build a bigger future for Xbox rather than a smaller one, noting that successful companies must adapt rather than rely on past longevity. 

These cuts arrive during a turbulent period for the wider gaming industry, which is already reeling from years of layoffs. Xbox previously cut 2,000 workers in 2024, followed by another 9,000 corporate job cuts as Microsoft doubled down on multi-billion-dollar AI spending. Escalating hardware costs and high demand for AI data centers have also forced console price hikes. Industry analyst Paolo Pescatore noted that Microsoft faces the challenge of redefining what Xbox stands for across console, PC, cloud, and subscription models. 

Under the new structure, Minecraft creator Mojang and Candy Crush developer King will report directly to Sharma. Analyst Piers Harding-Rolls observed that Xbox is narrowing its focus toward its largest intellectual properties and biggest audiences, rather than acquiring numerous smaller studios to fill its Game Pass subscription service. Encouragingly, the spun-off studios will retain ownership of their games and culture instead of facing permanent closure. Double Fine and Compulsion Games will both transition back to independent management, taking their respective intellectual properties with them as they navigate their independent futures.