Microsoft Sacks 4,800 Workers as AI-Driven Restructuring Hits Xbox Hard

Microsoft has announced large-scale layoffs, with 4,800 people, or approximately 2.1 per cent of Microsoft’s total workforce, affected by the cuts.

CNBC International reports that this wave of layoffs is part of Microsoft’s effort to reduce costs in the era of AI technology.

One of the most impacted business units is Xbox, Microsoft’s division operating in the gaming industry and the primary rival to Sony PlayStation. A total of 1,600 positions at Xbox have been eliminated, accounting for one-fifth of all Xbox employees.

“The way technology is built, deployed, and used is transforming faster than in any other era,” said Amy Coleman, Microsoft’s Chief People Officer, in a message sent to all employees.

Xbox CEO Asha Sharma stated that the wave of layoffs within her company is set to continue. Plans are in place for Xbox to lay off an additional 3,200 people in the near future.

“I know that restructuring over the next year will face many challenges. Unfortunately, it is not possible to make all the changes in a single day,” said Sharma.

Microsoft’s stock has been the worst-performing tech giant stock in 2026. Since the beginning of the year, Microsoft’s share price has plummeted by 19 per cent. Investors are selling Microsoft shares due to concerns regarding the impact of AI on the flagship enterprise software of the company founded by Bill Gates.

Other Microsoft business units, such as cloud services and LinkedIn, are still able to grow more rapidly. However, pressure is mounting on company revenue from Windows operating system licences and Surface computer devices.

Alongside the mass layoffs at Xbox, Microsoft will release four game studios previously under the Xbox umbrella: The Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs.