Microsoft is eliminating 4,800 jobs, about 2.1% of its workforce, with the Xbox unit losing roughly a fifth of its staff and four gaming studios set to become independent. The cuts land as the stock trails its megacap peers and the company redirects spending toward AI.
Microsoft is cutting 4,800 jobs, 2.1% of its workforce, in its latest move to trim costs during the AI build-out. The Xbox division is losing about one-fifth of its staff, and four gaming studios will be spun out.
Chief people officer Amy Coleman announced the reductions in a message to employees on Monday, saying they mostly hit the commercial and Xbox organizations. She was direct about the cause. According to Business Insider, Coleman wrote that "the roles eliminated today are not being replaced by AI."
Xbox takes the deepest cut
The gaming unit carries the heaviest load. Xbox is cutting 3,200 people through fiscal year 2027, CEO Asha Sharma wrote to her division, with 1,600 roles going on Monday. The other 1,600 sit on top of the companywide total of 4,800 leaving immediately.
Four studios will leave Microsoft altogether. Compulsion Games and Double Fine Productions, acquired in the 2010s, will become independent again, while Ninja Theory and Undead Labs have entered terms to join new ownership. France-based Arkane Studios, which arrived through the $8.1 billion ZeniMax Media deal in 2021, is consulting its works council on options.
A stock lagging its peers
The cuts follow a rough stretch for the stock. Microsoft has been the worst performer among megacap tech stocks in 2026, falling 19% as of Friday's close, as investors worry that generative AI could displace much of the enterprise software market. Business Insider reported the shares fell 19% in June, their worst month since the dot-com era.
The reductions also build on a voluntary retirement program Microsoft introduced in April, a first for the company. More than 30% of eligible employees took the offer, which let Microsoft cut a smaller share of staff than last year, when it eliminated 9,000 roles in July. Sharma told her team the gaming business would return to growth in 2027.
Sources: CNBC, Business Insider
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