Microsoft Corp. announced a major corporate downsizing Monday that includes cutting roughly 20% of the workforce within its Xbox gaming division.
Microsoft Chief People Officer Amy Coleman said in a blog post on Monday that the tech giant plans to eliminate approximately 3,200 roles from its interactive entertainment unit as part of a larger corporate restructuring. Total job cuts across all Microsoft divisions are expected to impact between 4,800 and 6,400 employees globally, representing a significant tightening of the company’s operational infrastructure. The staffing reductions represent the fifth major round of job cuts to impact Microsoft’s video game operations since the software manufacturer finalized its $69 billion acquisition of Activision Blizzard.
To improve operational efficiency, Microsoft will also condense its corporate hierarchy by flattening its internal leadership ranks. Management layers that reached up to 14 tiers in certain areas will be restricted to a maximum of five levels to accelerate decision-making. The planned workforce reductions will occur in phases, with 1,600 positions eliminated immediately and the remaining role terminations scheduled to take place over the next 12 months.
Xbox CEO Asha Sharma said in a memo to Xbox workers released by Microsoft: “Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.” Sharma also noted that Microsoft’s investments in Game Pass, a subscription gaming service, and multi-platform services have grown more slowly than expected, stating: “As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox.”
Sharma attributed the adjustments to underperforming growth in the Game Pass subscription platform alongside soaring production costs for console manufacturing. The division has struggled to generate anticipated financial yields despite extensive studio purchases in recent years. Sharma wrote that “We are operating at margins that are 3–10x lower than comparable platform and publishing businesses.” The executive also cited an industrywide hardware crisis driven by escalating component expenses.
The changes extend beyond staffing, with the corporate reorganization to include the divestment of multiple video game development studios previously integrated into Microsoft’s portfolio. Compulsion Games and Double Fine Productions will regain their independence under their original founders, while Ninja Theory and Undead Labs will transition to new ownership groups. Despite the sweeping changes and studio departures, Microsoft executives confirmed that none of the company’s publicly announced first-party software projects will be canceled.
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