Microsoft announced on Monday it is laying off 4,800 employees, or 2.1% of its workforce—with more to come—as part of a massive cost-cutting restructuring effort. The layoffs include major cuts from its Xbox division.
In a memo to staffers, Xbox CEO Asha Sharma said Microsoft was “resetting Xbox” and would be cutting a total of 3,200 employees, or 20% of that division, throughout fiscal 2027—including spinning off four gaming studios. Compulsion Games and Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will be spun off.
This amounts to eliminating 1,600 roles now and another 1,600 in the coming year, as the company focuses on artificial intelligence (AI) and away from its lagging gaming sector.
This is just the latest round of layoffs for the tech giant, coming a year after the company eliminated 9,000 jobs.
“Our business today is not healthy,” Sharma said. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”
So, what happened?
According to Sharma, “[Microsoft’s] core business weakened, and [they] added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history.”
The move comes just ten days after Microsoft announced it would again be raising the price on its Xbox by $100 on the 512 GB model, and $150 on the 1 TB model. That’s after Microsoft raised all Xbox prices by $20 to $70 last year, as Fast Company previously reported. Microsoft also recently raised prices for its Surface laptops.
Like Apple, which also recently increased the prices on its best-selling products (with the exception of the iPhone), Microsoft blamed AI-fueled memory and storage shortages for the consumer hike.
Shares of Microsoft (MSFT) were down over 1% in Monday midday trading at the time of this writing, after closing down nearly 19% this year as of Friday’s closing bell.