Microsoft cuts 4,800 jobs, cites AI-driven business shifts in Xbox and sales units

Microsoft eliminated approximately 4,800 roles on Monday, representing 2.1% of its global workforce, with the majority of cuts concentrated in Xbox and commercial sales. In a memo, Chief People Officer Amy Coleman attributed the changes to rapid technological transformation and shifting customer needs, noting that AI is altering how work is performed but not directly replacing eliminated roles.

Xbox’s CEO Asha Sharma described the cuts as "the most significant restructure in Xbox history," citing unsustainable margins and failed growth strategies such as the Game Pass subscription service. The division is reducing its management structure from 14 layers to no more than five, with a goal of trimming to three layers. Sharma also announced transitions for four gaming studios: Compulsion Games and Double Fine Productions will revert to independent studios, while Ninja Theory and Undead Labs will operate under new ownership with funding to complete existing projects.

The restructuring aligns with Microsoft’s broader push into enterprise AI through its Frontier Company unit, which is focused on deploying AI tools with a $2.5 billion investment. Coleman emphasized ongoing efforts to reskill and redeploy employees, stating that over 4,000 staff have been placed into new roles in the past year, including 500 this month.

The layoffs occur amid a broader tech industry trend, with nearly 154,000 jobs cut across major firms in the first half of 2026. While the article highlights AI’s role in transforming work processes, the core focus remains on Microsoft’s business restructuring and financial pressures in its gaming division.