Xbox Layoffs: 1,600 employees to be furloughed immediately, 3,200 jobs to be lost by FY27; CEO’s mail created a stir

At a glance…

• Xbox immediately laid off 1,600 employees.
• A total of 3,200 posts will be eliminated by FY27.
• The four gaming studios will be separate from Xbox.
• The CEO said, “Our business is not healthy right now.”
• The company was losing 64 cents on every $1 invested.
• The management layer will be reduced from 14 to a maximum of 5.

Microsoft’s gaming unit Xbox has started the biggest restructuring in its history. Company CEO Asha Sharma said in an email to employees that 1,600 employees are being laid off with immediate effect, while a total of 3,200 positions will be eliminated during FY27. Along with this, four studios of Xbox will also go under new management.

In her email, Asha Sharma acknowledged that Xbox’s current business is under pressure and the company needs major changes. they wrote, “Today our business is not healthy. We are operating at margins that are 3 to 10 times lower than similar platforms and publishing businesses.”

The CEO also revealed that the company was at one time losing about 64 cents on every $1 invested. According to him, Xbox bet on Game Pass, multi-platform strategy and large content portfolio in the last few years, but could not achieve growth at the expected pace. During this time, costs increased and the gaming industry also started facing challenges like hardware crisis.

This is an important email I sent today to all employees at XBOX:

team,

We are beginning the most significant restructure in XBOX history. After careful consideration, I’ve made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…

— ASHA (@asha_shar) July 6, 2026

Under the restructuring, Xbox’s four studios will work under new management. The company says that this will allow it to focus more on its core business, major franchises and high priority projects. However, the CEO clarified that none of Xbox’s publicly announced first-party games or projects are being cancelled.

The email also said that the company will simplify its organizational structure. The management layer, which is up to 14 levels in some departments, will be reduced to a maximum of 5 and where possible 3 levels. There is also a plan to reduce vendor expenses by 50%, so that the decision making process can be faster and operating costs can be reduced.

Asha Sharma assured the employees that these changes are not being made to make the company smaller, but to make it stronger and competitive in the future. He said that Xbox aims to return to the path of growth in the coming years and the company is expecting better performance by 2027.