Microsoft lays off 4,800 employees as Xbox undergoes its worst restructuring ever

Microsoft has reduced its workforce by approximately 4,800 employees, which accounts for about 2.1% of its global staff. The hardest hit was the Xbox division, which lost 1,600 positions. The company described this as the most significant restructuring in the history of the gaming division.

The announcement came through two memos shared with staff. Amy Coleman, Microsoft’s EVP and Chief People Officer, told employees that the company’s business is changing because the world around it is changing.

“The way technology is built, deployed, and used is transforming faster than at any point in my time here,” she wrote, adding that Microsoft must shift how it operates to stay relevant. Coleman stressed that the roles being eliminated “are not being replaced by AI,” but acknowledged that AI is changing how work gets done and that some tasks that employees perform daily can now be automated.

Asha Sharma, the CEO of Xbox, was more direct. In her memo to Xbox staff, she said plainly: “Our business today is not healthy.” She noted that Xbox is operating at margins that are three to ten times lower than comparable platform and publishing businesses, and that strategies including Game Pass and a wider content portfolio did not grow at the expected pace.

“As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome,” she wrote. “And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”

What the Microsoft restructuring is actually changing at Xbox

The restructuring involves more than just job cuts. Sharma announced that Xbox will reduce its management layers from as many as 14 to a maximum of five, ideally having just three…