Redmond, Washington: Microsoft has announced plans to lay off 4,800 employees, or about 2.1 per cent of its global workforce, as the technology giant restructures its Xbox gaming division and continues to prioritise investments in artificial intelligence (AI).
The move includes 3,200 job cuts within the gaming business, with around 1,600 employees being laid off immediately as part of the restructuring.
Xbox business to undergo major changes
The overhaul comes after years of heavy investment in Xbox, including Microsoft’s multi-billion-dollar acquisition of Activision Blizzard. Despite these investments, the company has struggled to close the gap with competitors Sony’s PlayStation and Nintendo.
As part of the restructuring, Microsoft will divest four game studios. Compulsion Games and Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will be spun off to continue developing their flagship franchises. Meanwhile, Arkane Studios has begun consultations with its workers’ union in France regarding its future.
Microsoft has also been shifting its gaming strategy by releasing more titles across multiple platforms rather than relying solely on Xbox-exclusive games.
AI investments reshape priorities
The company said the layoffs are part of broader efforts to improve operational efficiency while continuing its significant investment in AI infrastructure.
Chief People Officer Amy Coleman told employees that the roles being eliminated are not being replaced by AI, although she acknowledged that artificial intelligence is changing how work is performed across the organisation.
Industry analysts said the restructuring reflects Microsoft’s efforts to balance rising AI spending with profitability rather than simply reducing costs.
Company focuses on long-term growth
Microsoft’s Azure cloud business continues to benefit from strong demand for AI services, but the company is also investing heavily in data centres and AI infrastructure, increasing operating costs.
The software giant has projected $190 billion in spending for 2026 and is expected to announce its latest financial results later this month.
Analysts believe the latest restructuring signals Microsoft’s continued focus on AI-led growth while streamlining business units that have underperformed against expectations.
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