Xbox CEO Asha Sharma Explains 3200 Layoffs: ‘I Know This Is Painful’ as Microsoft Restructures Gaming Division

In a message to employees, Xbox CEO Asha Sharma acknowledged the emotional impact of the decision and described it as the biggest organisational overhaul in the company’s history.

The layoffs are part of Microsoft’s broader effort to streamline operations while increasing investments in artificial intelligence and improving Xbox’s long-term financial performance.

Asha Sharma Says Job Cuts Were a Difficult Decision

In a note shared with employees, Sharma said the layoffs were painful and recognised the contributions of the people affected.

“I know this is painful. These changes will directly affect people who have poured their creativity into building Xbox. Today’s decisions do not reflect their talent or dedication,” she wrote.

According to the company, more than 1,600 positions will be eliminated immediately, while the remaining reductions will take place during the next fiscal year.

Why Is Xbox Cutting Jobs?

Sharma explained that Xbox expanded rapidly over the past several years through major studio acquisitions, investments in Game Pass, multi-platform gaming and a broader content strategy.

However, she said those investments did not deliver the expected business growth.

“Our business today is not healthy,” Sharma said, adding that Xbox operates with profit margins significantly lower than comparable gaming platforms and publishers.

She also pointed to the gaming industry’s ongoing hardware challenges, saying the company must adapt to changing market conditions.

Major Changes Planned Across Xbox

As part of the restructuring, Xbox will implement several organisational changes aimed at improving efficiency.

Key changes include:

• Around 3,200 job cuts across the Xbox division.
• Four game development studios will leave Xbox.
• Management layers will be reduced from as many as 14 levels to a maximum of five.
• Vendor spending will be cut by 50%.
• Teams across Activision, Blizzard, Bethesda/ZeniMax, King, Mojang and Xbox Game Studios will be affected.

Despite the restructuring, Sharma confirmed that no publicly announced first-party Xbox games or projects have been cancelled.

Helen Chiang Named Xbox Chief Operating Officer

Xbox also announced a leadership change as part of the restructuring.

Helen Chiang has been promoted to the newly created role of Chief Operating Officer (COO). She will oversee content, hardware, platform and services under a unified operating model designed to simplify decision-making across the business.

Microsoft’s AI Investments Drive Broader Cost-Cutting

The Xbox layoffs are part of a larger restructuring across Microsoft.

The company is reportedly reducing approximately 4,800 jobs company-wide as it reallocates resources toward artificial intelligence initiatives and future technology investments.

Many technology companies have recently announced similar restructuring measures as they increase spending on AI while seeking greater operational efficiency.

Xbox Looks Ahead Despite Workforce Reduction

Although the layoffs mark one of the most significant changes in Xbox’s history, Sharma said the company remains focused on long-term growth.

She expressed confidence that gaming will continue to expand globally and said the restructuring is intended to position Xbox for the next decade rather than reduce its ambitions.

“The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before,” Sharma wrote.

She concluded by saying that companies cannot rely solely on past success and must continue adapting to remain competitive.