Microsoft lays off nearly 5K staff, most of them at Xbox: Our business today is not healthy | Latest Tech News
Microsoft is axing 4,800 staff, most of them from its Xbox division, as it and the remainder of the tech industry search to adapt to the AI period.
The cuts come as the software program giant has closely invested in artificial intelligence after years of pouring money into gaming.
“Our business is changing because the world around it is changing. The way technology is built, deployed, and used is transforming faster than at any point in my time here,” Amy Coleman, Microsoft’s chief people officer, wrote in a Monday memo to staff.
Xbox Chief Executive Asha Sharma said the sagging video sport maker must shed staff amid an overhaul. Bloomberg via Getty Images
The layoffs included 1,600 Xbox staff who have been immediately let go, with another 1,600 set to be axed over the remainder of Microsoft’s fiscal 12 months, according to Xbox Chief Executive Asha Sharma.
“Our business today is not healthy,” she wrote staff, going on to listing challenges like slow growth.
“We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” Sharma added. “We must reset Xbox.”
Microsoft – which turned a dominant pressure in the video sport area with the landmark launch of the Xbox in 2001 – is also promoting or spinning off 4 sport development studios and weighing strategic choices for a fifth, according to Sharma.
The cuts account for 2.1% of Microsoft’s global workforce — and one-fifth of Xbox staffers.
AI has been blamed for layoffs throughout the tech sector, which noticed its worst start to the 12 months in phrases of employment since 2023. The first three months of 2026 introduced 52,050 tech layoffs — a 40% leap from the same period last 12 months, according to govt teaching firm Challenger, Gray & Christmas – with AI more and more being blamed for the cuts.
The soon-to-be axed Microsoft staff gained’t really get replaced by AI, Coleman said.
Microsoft turned a dominant pressure in the video sport business with the landmark launch of the Xbox in 2001.
“At the same time, what is true is that AI is changing how work gets done. Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves,” she said.
Microsoft stock was down about 1.5% as of noon Monday.
Microsoft – along with rivals Sony and Nintendo – has jacked up costs for its Xbox consoles amid a global reminiscence chip scarcity triggered by seemingly bottomless demand for highly effective chips from the AI sector.
The video sport industry has confronted waves of layoffs over the past two years after firms including Microsoft ramped up hiring during the COVID pandemic. That growth slowed once pandemic restrictions ended.
Microsoft purchased sport makers such as Activision Blizzard to strengthen Game Pass, its Netflix-style subscription service. Sharma acknowledged in the memo that Game Pass “did not grow at the pace we expected.”
Xbox income fell 5% in the quarter ended in March in contrast with a 12 months earlier. The division’s revenue margin for the fiscal 12 months ended in June was 3%, down from the earlier 12 months.
Satya Nadella’s Microsoft has poured ever-more assets into AI. dpa/image alliance via Getty Images
Microsoft CEO Satya Nadella tapped Sharma, the previous chief working officer of Instacart, to helm Xbox in February despite her lack of expertise in the video sport industry. Since taking over, she has hustled to reshape the business.
Sharma is decreasing the quantity of video games Microsoft publishes while placing more assets behind its greatest franchises, including Minecraft, Candy Crush and Fallout. She also lowered the price of Game Pass after the service misplaced subscribers following a price increase last 12 months, and stopped including new “Call of Duty” titles to the subscription service, requiring gamers to buy them individually.
Beyond gaming {hardware} and subscriptions, Xbox operates Microsoft’s digital sport store for Windows PCs. As the company scales back its own sport development, Sharma is working to make Microsoft a more engaging distribution platform for the growing quantity of unbiased sport builders.
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