Major Xbox Layoffs Hit Video Game Platform Across Company

Microsoft‘s Xbox video game division will shed 3,200 jobs and four of its game studios in what CEO Asha Sharma is calling “the most significant restructure in Xbox history.”

Sharma announced the restructuring in a memo to staff Monday, titled “resetting Xbox.” The changes will happen over the course of the next year, with about 1,600 layoffs happening today and the remainder being spread out over the next 12 months or so.

“I recognize that a year-long restructuring creates additional challenges,” Sharma writes. “Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale.”

The cuts are part of larger layoffs at Microsoft, which will total 4,800 jobs, with the tech giant’s commercial operations hit hardest alongside Xbox.

Among the changes: Compulsion Games and Double Fine Productions will be spun out to their management to operate as independent studios, while Ninja Theory and Undead Labs have secured funding and will operate under new ownership.

Sharma writes bluntly that “our business today is not healthy,” citing lower margins and lower growth than expected, even as the company added staffing. “And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox,” she added.

She said that some decisions now go through 14 layers of management. “That complexity has slowed decisions, blurred accountability, and made it harder to deliver for players. As we reset Xbox, we will simplify,” she wrote. “We will reduce management layers to no more than 5, and where possible, 3.”

She also named Helen Chiang the division’s first COO, holding P&L responsibility across the division.

“These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before,” Sharma writes. “This year, we’ll invest as much in XBOX as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates.”

Microsoft chief people officer Amy Coleman told staff in a memo that while the cuts are not about replacing employees with AI, the tech is a part of the rationale for making the changes.

“I also want to be direct that the roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done,” she wrote. “Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves. Our customers are navigating this same shift, and they’re counting on us to help them through it. We can’t do that well unless we’re doing it ourselves.”