'World around is changing': Why Microsoft is laying off 4,800 people, overhauling Xbox

The restructuring majorly centres around Microsoft's gaming division Xbox, with approximately 3,200 gaming jobs to be shed over the coming fiscal year.

In one of its biggest overhauls, Microsoft is planning to lay off 4,800 people - roughly two percent of its global workforce. The announcement came as a big shock for many but is also the latest in a string of such moves being made by Microsoft over the past one year. The only bigger mass layoff by the tech giant was in June last year, when it said that it would let go less than 4% of the workforce it had in 2024, which would come to around 9,000 people.

In the deepest overhaul in Xbox's history, Microsoft is laying of 4,800 people. (REUTERS)

This time, the restructuring majorly centres around its gaming division Xbox, with approximately 3,200 gaming jobs to be shed over the coming fiscal year, reported news agency AFP. These layoffs include positions at four studios that are being spun off or sold.

Xbox CEO Asha Sharma has reportedly told employees that 1,600 of these jobs would be cut immediately, with the remaining layoffs to follow through fiscal year 2027.

Why is Microsoft undergoing big change?

The latest Microsoft job cuts were announced to the staff in a memo by Amy Coleman, Microsoft's executive vice president, who said: “Our business is changing because the world around it is changing”. “Companies don't get to choose whether their industry changes; they only get to choose whether they change with it,” the memo further read.

She also cited the losses to the gaming giant through Game Pass, its Netflix-like subscription service. Sharma said that Xbox lost millions of subscribers due to a subscription price hike in 2025, forcing the company to reverse course and slash the fee.

FILE PHOTO: The Microsoft Xbox Game Pass logo is seen at the Paris Games Week (PGW), a trade fair for video games in Paris, France.

"History is full of companies that mistake longevity for inevitability," Asha Sharma said, adding: "We will not be one of them."

Biggest overhaul for Xbox. Is AI push a factor?

Apart from the 1,600 job cuts that Xbox will immediately be seeing, others will soon follow suit. Besides, four studios will leave Xbox as part of the restructuring. While Compulsion Games and Double Fine Productions will go independent and retain their intellectual property, Ninja Theory and Undead Labs will be joining new owners to continue operations with a different funding source.

Further closures or a sale are likely with the Arkane's management in France beginning a required consultation with its Works Council.

The mass layoffs are also being seen as Microsoft's efforts to continue pouring in massive amounts of money to stay in the artificial intelligence race. Amy Coleman said that while the eliminated roles were “not being replaced by AI,” automation is reshaping how work is done across the company.

She also said that the job cuts would build on Microsoft's $2.5 billion push, announced last week, to embed 6,000 engineers with major clients to accelerate AI adoption.