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Microsoft cut around 4,800 roles, or 2.1% of its global workforce, on Monday \u2014 the latest in a series of layoffs<\/a> that\u2019s stoking fears <\/a>that AI will replace people at companies.\u00a0<\/p>\n The layoffs will hit Xbox and commercial sales the hardest, with Xbox losing 1,600 staffers today, according to memos shared with Microsoft\u2019s staff.<\/p>\n Here\u2019s a snippet from a memo<\/a> from Amy Coleman, EVP and chief people officer:\u00a0<\/p>\n \u201cOur 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. Our customers\u2019 needs are shifting, the business models that serve them are shifting, and that means the work itself \u2013 what we do, where we focus, and how we\u2019re organized \u2013 has to transform too. <\/p>\n Companies don\u2019t get to choose whether their industry changes; they only get to choose whether they change with it. That means we will need to adjust resources and roles and shift how we operate so we can have the greatest impact for our customers.\u201d<\/p>\n<\/blockquote>\n Coleman stressed that the roles being eliminated today \u201care not being replaced by AI,\u201d but noted, \u201cwhat is true is that AI is changing how work gets done.\u201d<\/p>\n \u201cSome 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,\u201d Coleman wrote.<\/p>\n To many feeling the sting of unemployment, that\u2019s a distinction without a difference.<\/p>\n The layoffs build on Microsoft\u2019s recent launch of its Frontier Company business unit<\/a>, which is focused on delivering enterprise AI deployments with the firm\u2019s existing AI tools and an army of forward deployed engineers. That move is backed by a $2.5 billion investment, mirroring a common theme we\u2019re seeing among layoffs this year \u2014 job cuts are correlating with increased AI spending.\u00a0<\/p>\n Speaking about the Xbox layoffs, Coleman said little: \u201cWe are restructuring to position the business for long-term success. Engineering teams across the company will also evolve their structure and priorities to meet customer needs and innovate for the future.\u201d<\/p>\n Of today\u2019s 4,800 layoffs at Microsoft, 1,600 will hit Xbox, with about 3,200 cuts in total expected through fiscal year 2027, according to Asha Sharma<\/a>, CEO of Xbox. In an email she sent to employees on Monday, Sharma called this \u201cthe most significant restructure in Xbox history.\u201d <\/p>\n \u201cOur business today is not healthy,\u201d Sharma wrote. \u201cWe are operating at margins that are 3\u201310x lower than comparable platform and publishing businesses.\u201d She added that Xbox made bets like its monthly subscription service Game Pass, alongside moves to grow its portfolio of content and invest in multi-platform, among other attempts to breathe life into the business. None of those strategies grew at the expected pace, leading to the core business weakening even as Xbox added more teams and investment. <\/p>\n \u201cAnd now the industry is facing the most severe hardware crisis in its history,\u201d Sharma said. \u201cWe must reset Xbox.\u201d<\/p>\n As part of the shift, Microsoft will transition four of its gaming studios to operate under new management, ensuring preservation of intellectual property and ongoing projects. Specifically Compulsion Games and Double Fine Productions will return to independent studios, according to Sharma. Ninja Theory and Undead Labs are coming under new ownership with funding to complete and grow some of their more popular games.<\/p>\n According to Sharma\u2019s memo, Xbox is also flattening management hard, cutting the current 14 management layers to no more than five, but ideally three. As part of this major organization redesign, Xbox is making longtime executive Helen Chiang chief operating officer with end-to-end profit and loss authority across content, hardware, platform, and services. <\/p>\n Xbox\u2019s restructuring plan centers around narrowing focus by dropping sprawling creative bets that don\u2019t produce platform-scale returns, and instead homing in on core strategic pillars like Mojang and King, the businesses behind Minecraft and Candy Crush.<\/p>\n The Xbox layoffs come as the gaming industry shrinks amid new generative AI opportunities. Companies building world models \u2014 like Google DeepMind, World Labs, General Intuition, Luma AI, and Runway \u2014 have received millions in funding over the past year and garnered plenty of hype for their playable world model demos. All of those companies see gaming as a near-term opportunity for commercialization.\u00a0<\/p>\n In April, Microsoft offered buyouts<\/a> structured as voluntary separations to an undisclosed number of employees \u2014 some estimates<\/a> put the number at around 5,500 \u2014 with the goal of building high-performing teams. Last year, Microsoft laid off about 15,000 employees across two rounds.<\/p>\n The eliminations are part of a series of layoffs in the tech industry that\u2019s seen close to 154,000 people lose their jobs just in the first half of 2026, with Big Tech firms like Meta, Oracle, Amazon, and Cognizant cutting thousands of workers.<\/p>\n Microsoft said that along with Monday\u2019s cuts, it\u2019s working on ways to keep staff on by re-skilling workers or placing people in new roles.<\/p>\n \u201cOver the past year, we have redeployed more than 4,000 employees into new roles, including another 500 this month,\u201d Coleman said.\u00a0<\/p>\n Microsoft did not immediately return a request for comment and more information.<\/p>\n This article has been updated with more details into the Xbox layoffs. It was originally published July 6, 2026 at 8:08 am PT. <\/em><\/p>\n<\/div>\n When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/em><\/p>\n\n