Microsoft Corporation is cutting approximately 4,800 employees, representing about 2.1% of its roughly 220,000-strong global workforce, with the largest share of reductions falling on its commercial sales business and Xbox gaming division. Xbox alone plans to eliminate 3,200 jobs — around 20% of its headcount — over the next twelve months, with 1,600 positions removed immediately. As part of the overhaul, four Xbox studios will be divested: Ninja Theory and Undead Labs are to be sold to undisclosed buyers, while Compulsion Games and Double Fine will be returned to their management teams with full control of their intellectual property and revenue streams. Arkane Studios, based in France, is under strategic review, with Xbox beginning required consultation with its Works Council on potential options.
Xbox chief executive Asha Sharma, who succeeded Phil Spencer in the role in February 2026, wrote to staff that Xbox is operating at margins three to ten times lower than comparable businesses and that the company 'must reset Xbox' [Source: Bloomberg]. A memo co-authored with Xbox content chief Matt Booty cited more than $20 billion invested in content, platform and hardware subsidies over five years, during which revenue declined by close to half a billion dollars over the same period [Source: Yahoo Finance / Quartz]. The four studios being divested collectively employ approximately 350 people. Sharma's letter also announced that Helen Chiang, previously corporate vice president of Minecraft, will become Xbox's first chief operating officer, and that management layers will be reduced to no more than five.
The announcement adds to a prolonged period of workforce reductions at Microsoft. In 2025, the company cut more than 15,000 jobs globally across two rounds of layoffs — the largest reductions in more than a decade — including approximately 6,000 departures in May and a further wave of around 9,000, representing about 4% of total headcount, in July. The latest round follows that pattern, timed to the opening of Microsoft's fiscal year on 1 July. Separately, approximately 30% of roughly 8,750 eligible US employees accepted Microsoft's first-ever voluntary retirement programme in recent weeks, according to chief people officer Amy Coleman. About 600 of the newly announced cuts are in Washington state, though Microsoft's workforce there is expected to remain stable at around 52,000 people as a result of ongoing hiring.
Microsoft shares (MSFT) fell 23% in the first six months of 2026, their worst half-year performance since 2000 and the weakest showing among the Magnificent Seven in that period [Source: Yahoo Finance]. A slide of roughly 30% over the past nine months has wiped out approximately $1.2 trillion in market value. That decline has coincided with record capital spending on artificial intelligence infrastructure and Wall Street pressure to keep operating expenses in check. Cloud services and LinkedIn have shown accelerating growth in recent quarters, while Windows OS licences, Surface devices and the Xbox gaming unit have lagged. The broader restructuring of the sales and consulting organisation builds on the recent launch of the Microsoft Frontier Company, a $2.5 billion initiative to embed 6,000 engineers inside customer organisations to deploy AI.
Sources: The Verge, Bloomberg, CNBC, GeekWire, Variety, Yahoo Finance