Microsoft will lay off approximately 4 800 employees, representing 2% of its global workforce, as the company undergoes a massive corporate restructuring. The cuts, confirmed by the company on July 6, 2026, primarily impact its commercial division and the Xbox gaming unit, which will see 3 200 job losses over the next fiscal year.
Why is the Xbox division restructuring?
According to Xbox director Asha Sharma, the gaming division’s current business model is not sustainable. In an internal email sent to staff, Sharma noted that Xbox is operating with profit margins between three and ten times lower than those of its competitors. Despite significant investments in the Game Pass subscription service and a multi-platform strategy, the division has failed to reach necessary growth targets.
The company is also grappling with what Sharma described as the “most severe hardware crisis in the history” of the gaming industry. To combat these losses, the firm is moving to redefine its operations. This shift includes a significant reduction in staff, with several hundred employees being let go immediately, and the remaining cuts planned throughout the upcoming fiscal year.
The restructuring includes the divestment of four studios. Compulsion Games and Double Fine Productions are transitioning to independent status, while Ninja Theory and Undead Labs are currently in negotiations to be acquired by new owners.
How is the broader Microsoft organization changing?
Amy Coleman, Microsoft’s executive vice president, stated in a company-wide note that the layoffs are a direct response to a shifting global landscape. “The companies cannot choose if their sector changes; they can only choose if they change with it,” Coleman wrote. While the company is pivoting toward a heavy investment in artificial intelligence, Coleman clarified that the current layoffs are not a result of AI replacing human roles, though she acknowledged that automation is fundamentally transforming internal workflows.
What is the impact on international operations?
The restructuring is not limited to the United States. In France, the management of the Arkane studio has initiated a mandatory consultation process with its works council.
Pro Tip: Staying informed during corporate shifts
When major tech companies announce large-scale layoffs, industry analysts often point to the “re
