Microsoft Announces 4,800 Job Cuts, Including 3,200 at its Xbox Division

The beginning of Microsoft’s new fiscal year on July 1 is usually a painful moment for the company’s workforce, and this year is no exception. This morning, the company announced that it was laying off approximately 4,800 employees, which represents 2.1% of the company’s workforce.

The layoffs are mostly impacting the Xbox division and Microsoft’s commercial sales team. In an internal memo obtained by The Verge, Amy Coleman, Executive Vice President, Chief People Officer at Microsoft, said that the layoffs reflect the “need to adjust resources and roles and shift how we operate,” adding that “the roles eliminated today are not being replaced by AI.”

Asha Sharma, the new CEO of Xbox, announced that the Xbox division will eliminate 3,200 jobs throughout the company’s new fiscal year, and this is starting with 1,600 job cuts today. The layoffs will affect most Xbox studios and the division’s platform teams, though none of Xbox’s publicly announced games or projects are being cancelled. Sharma also announced four studio divestitures, but no studios are being closed today.

Sharma inherited a bloated Xbox division that spent $100 billion to acquire studios, all while Game Pass growth stalled and Xbox console sales cratered. Despite Microsoft becoming one of the biggest publishers on the market following the acquisition of Activision Blizzard, Sharma previously warned that the business wasn’t in a healthy situation.

“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. That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset XBOX, we will simplify,” Sharma said today.

This simplification effort starts with studio divestitures: Double Fine and Compulsion Games are becoming independent and will retain all their IP and back catalogue. They have also received runway funding from Microsoft for their next games.

Ninja Theory and Undead Labs, however, are being acquired by unknown companies, but it appears the deals aren’t closed yet. These studios will continue working on their previously announced games, Senua and State of Decay 3, which have both been announced for PlayStation 5 in addition to Xbox Series X|S consoles and PC. Lastly, Arkane Lyon, which is currently working on Marvel’s Blade, is “beginning required consultation with its Works Council to review potential strategic options.”

In addition to these studio divestitures, Sharma also announced some organizational changes: Mojang (Minecraft) and King (Candy Crush) will now report directly to her. Sharla also appointed Helen Chiang, previously CVP of the Minecraft Franchise, as the new Chief Operating Officer. Dave McCarthy, CVP of Xbox product services will is retiring after 17 years.

“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. 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,” Sharma said today.