Microsoft Cuts 4,800 Jobs

Microsoft is cutting 4,800 jobs, roughly 2.1% of its global workforce of about 228,000, in a restructuring that hits its sales and consulting divisions alongside a sweeping overhaul of its struggling Xbox gaming business. The reductions, confirmed on Monday, come as the software giant pours record sums into artificial intelligence infrastructure while facing renewed pressure from investors to control costs.

Xbox absorbs the heaviest share of the pain. Of the 4,800 cuts announced immediately, 1,600 fall within the gaming division, with further reductions planned over the next 12 months to bring total Xbox job losses to around 3,200, roughly 20% of its workforce, part of what will eventually total about 6,400 cuts across the company this fiscal year once the phased reductions are complete. Xbox chief executive Asha Sharma, who took the role in February, told staff the division’s economics were unsustainable, citing profit margins three to ten times lower than comparable businesses and a metric Microsoft uses internally, its accountability margin, that had fallen to just 3%. In a typical year, she said, Xbox was losing 64 cents for every dollar invested in the business.

The restructuring extends well beyond headcount. Xbox will sell two studios, Ninja Theory and Undead Labs, to undisclosed buyers, while Double Fine and Compulsion Games will be spun out and returned to founder ownership, retaining the intellectual property they built under Microsoft. A fifth studio, Arkane Studios in Lyon, is entering a review process toward a possible sale or spin-off, a process expected to take longer given French labour law protections. All five studios were acquired during a decade-long spending spree under former Xbox chief Phil Spencer, most notably the $69bn purchase of Activision Blizzard in 2023, intended to build out the Game Pass subscription service. That growth has since plateaued, and Sharma acknowledged the acquisitions had not delivered value at the pace expected.

The cuts land against a difficult run for Microsoft’s share price, down nearly 23% to 30% in the first half of 2026 by different measures, its worst first-half performance since 2022, erasing roughly $1.2 trillion in market value over nine months. That decline sits awkwardly alongside the company’s spending plans: Microsoft has projected capital expenditure of $190bn for 2026, far above analyst expectations, driven largely by data centre capacity to support Azure and generative AI services. Earlier this year the company had already offered voluntary buyouts to about 9,000 US staff, roughly 7% of its domestic workforce, before Monday’s further cuts.

Microsoft’s position mirrors a broader pattern across the technology sector. Combined AI capital spending by Microsoft, Alphabet, Amazon and Meta is expected to exceed $700bn in 2026, according to analyst estimates cited by Reuters, even as each company continues to shed staff. Amazon confirmed 16,000 corporate job cuts in January, following 14,000 in October, while Oracle’s workforce fell by 21,000, about 13%, over its fiscal year, and Meta restructured roughly 10% of its staff in May, shifting thousands into AI-focused roles while closing thousands of open positions elsewhere. Microsoft itself cut more than 15,000 jobs across two rounds in 2025, its largest reductions in over a decade.

Microsoft’s president and vice chair, Brad Smith, framed the latest cuts as a necessary adaptation to remain a viable employer over the long term, rather than a retreat from the gaming business. Sharma made a similar case for Xbox specifically, arguing the changes were intended to sharpen focus on larger projects, including Minecraft, rather than shrink the platform’s ambitions, which she said still included reaching one billion daily players.