• by Colin Kirkland , 5 hours ago

As Microsoft continues to invest in and shapeshift around artificial intelligence (AI), the tech giant is cutting 4,800 jobs -- impacting 20% of the staff of its gaming division Xbox, which is expected to be fully restructured, according to a company memo.

Amy Coleman, executive vice president and chief people officer at Microsoft, informed employees on Monday that Microsoft must adjust its resources and staff structures in order to adapt to the changing industry landscape. “Our business is changing because the world around it is changing,” Coleman wrote. 

The way technology is built, deployed, and used is transforming faster than at any point in my time here. 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 organized -- has to transform too.”

According to Coleman, the 2.1% of Microsoft's workforce being eliminated is “not to be replaced by AI,” although due to advanced AI technologies, more tasks are being automated.

The biggest changes will hit Xbox, the company’s gaming division, due to margins that are currently 3-10x lower than relevant platforms and publishing businesses, according to  a memo posted on X by Xbox’s new CEO Asha Sharma. 

Attempting to build products that appeal to a wider variety of users and boost its margins, Sharma explained that the division will be reduced by 3,200 employees throughout 2027, with 1,600 roles cut on Monday.

In addition, four gaming studios -- Compulsion Games, Double Fine Production, Ninja Theory, and Undead Labs -- will depart from Xbox and fall under new management.

To simplify, Xbox also plans to downsize its 14 management layers to no more than five and ideally, three.

To streamline business operations, the company is naming Xbox veteran Helen Chiang as its first chief operating officer role tied to content, hardware, platform, and services.

“We bet on Game Pass, multiplatform, and a broader portfolio of content,” Sharma writes, adding that these businesses have not grown at the pace originally expected. “We must reset Xbox.”