Microsoft’s Xbox to cut 3,200 jobs in major restructuring  

Microsoft’s gaming division, Xbox, has announced the most significant restructuring in its history, revealing

Microsoft’s gaming division, Xbox, has announced the most significant restructuring in its history, revealing plans to eliminate approximately 3,200 jobs over the course of its 2027 fiscal year. The layoffs represent nearly 20 percent of the division’s workforce and mark a major effort to reshape the business following a prolonged period of financial challenges.

The company confirmed that around 1,600 employees will leave immediately, while the remaining job reductions will take place gradually throughout the coming year. The restructuring is aimed at streamlining operations, reducing management layers, and improving the long-term financial performance of the Xbox division.

In a message shared with employees, Xbox Chief Executive Officer Asha Sharma described the company’s current position as unsustainable. She acknowledged that the gaming business has struggled financially for years and stressed that meaningful changes are necessary to secure its future.

“Our business today is not healthy,” Sharma said, explaining that the division has consistently operated with profit margins well below industry standards. She noted that in a typical year, Xbox lost 64 cents for every dollar invested, underscoring the need for a comprehensive transformation.

According to Sharma, the restructuring is intended to reset the organization by creating a leaner and more efficient structure. She criticized the growth of excessive management layers within the company, revealing that some departments had expanded to as many as fourteen levels of management. The new strategy will reduce those layers to a maximum of five, allowing for faster decision-making and improved accountability.

As part of the overhaul, Xbox will also reshape its game development network. Five studios are being removed from the Xbox portfolio in a move designed to focus resources on key projects.

Compulsion Games and Double Fine will become independent studios once again, keeping ownership of their existing intellectual property and game catalogs. Meanwhile, Ninja Theory and Undead Labs are set to transition to new ownership after securing financial backing to complete ongoing projects, including Senua and State of Decay 3.

In addition, Arkane Lyon has entered a formal consultation process to determine its future. While the studio’s final outcome has yet to be decided, Sharma emphasized that Xbox does not need to own every successful independent developer to remain competitive.

The company said the restructuring is part of a broader strategy to concentrate investment on high-priority projects while adopting a more disciplined financial approach. Rather than reducing overall spending, Xbox plans to invest its resources more strategically.

“These changes are about building a bigger future for Xbox, not a smaller one,” Sharma stated. “This year, we’ll invest as much in Xbox as we ever have, but we’ll do so with greater focus, greater discipline, and greater clarity.”

Despite outlining the company’s long-term vision, Sharma acknowledged the personal impact of the layoffs on employees. She thanked affected staff members for their dedication and creativity, stressing that the decision was driven by business realities rather than individual performance.

“I know this is painful,” she wrote. “These changes will directly affect people who have devoted their talent and passion to building Xbox. Today’s decisions do not reflect their ability, commitment, or the value they have brought to the company.”

Microsoft also reassured gamers that the restructuring will not affect its current lineup of announced first-party titles. The company confirmed that no previously announced games have been canceled and said it remains committed to delivering major releases while working toward sustainable profitability by the end of fiscal year 2027.