Xbox strongly hit by changes amid need to 'reset'
Microsoft is laying off around 4,800 roles, or about 2.1% of its global workforce in a major restructure that will significantly downsize its video gaming brand Xbox.
Amy Coleman, EVP and chief people officer at Microsoft, announced the layoffs on the company's website on Monday.
"The 'why' is this: 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," Coleman said.
"Our customers' needs are shifting, the business models that serve them are shifting, and that means the work itself – what we do, where we focus, and how we're organised – has to transform too."
A huge part of the changes at Microsoft will impact Xbox, which will see the "most significant restructure" in its history, according to Xbox CEO Asha Sharma.
In a separate announcement on X, Sharma said Xbox will reduce its workforce by approximately 3,200 employees throughout FY27.
"This will include approximately 1,600 role eliminations today, and in addition, four studios will leave Xbox to new management," she said.
"I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox. Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today's decisions do not reflect their talent or dedication."
Layoffs at Microsoft
Microsoft joins the wave of major organisations globally that are reducing their workforce for a variety of reasons, including artificial intelligence adoption.
Coleman, however, clarified that the layoffs are not because of AI.
"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 added.
According to the CPO, Microsoft has been looking for ways to reduce the need for job eliminations in the organisation.
Over the past year, it has redeployed more than 4,000 employees into new roles, including 500 this month. Four of its gaming studios will also be operating under new management, with the goal of preserving both their intellectual property and ongoing projects.
More than 30% of its eligible employees also chose to participate in its recent voluntary redundancy programme, with Microsoft considering similar approaches in the future.
"While this doesn't change the difficulty of today's news, we will continue to do everything we can to create opportunities for our people, reduce the need for job eliminations where possible, and responsibly support those affected with care and respect," Coleman said.
She added that Microsoft will continue equipping employees with new skills, including in AI.
"For those who are impacted, we provide financial support and resources to help them take their next step," she said.
'We must reset Xbox'
Meanwhile, Sharma cited the challenging business environment for the changes at the video gaming brand, as she stressed the need to "reset" the firm.
"Our business today is not healthy. We are operating at margins that are 3–10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure," she said.
The company's investment in Game Pass, multi-platform, and its other broader portfolio of content also did not deliver at the pace the organisation expected.
"As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox," she added.
The Xbox CEO further underscored the need to simplify amid the complex layers of management within the company.
"Today, in some parts of the company, work passes through as many as 14 layers of management. Our platform teams are 40% larger than they were at the start of this generation, even as our player base and playtime have declined," she said.
"That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset Xbox, we will simplify."
She announced that management layers will be reduced to no more than five, and where possible three, as well as streamlined work with a cleaner code base, shared services, and reduced vendor spend.
In the wake of these changes, Xbox named Helen Chiang as the company's new chief operating officer, who will handle end-to-end profit and loss responsibility across content, hardware, platform, and services.
"These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we've seen before," Sharma said.
"This year, we'll invest as much in Xbox as we ever have, but we'll invest with greater focus, greater discipline, and greater clarity, all in service of making Xbox where the world plays and creates."
