Microsoft has laid off approximately 4,800 people, primarily from its Xbox and commercial divisions, divested itself of four studios, and reduced its management structure, which currently has up to 14 levels, in order to expedite decision-making.
On July 6, 2026, Microsoft announced its plan to cut approximately 4,800 jobs, representing about 2.1% of its global workforce. Immediately, approximately 1,600 people were laid off in the Xbox division.
The latest in our company transformation - The Official Microsoft Blog
Resetting XBOX - XBOX Wire
https://news.xbox.com/en-us/2026/07/06/resetting-xbox/
The layoffs will primarily affect the Commercial and Xbox divisions. Microsoft stated that in the Commercial division, they will be reviewing their operations and working closely with customers to help accelerate customer technology adoption, while in the Xbox division, they will be restructuring their operations for long-term success.
Asha Sharma, CEO of the Xbox division, has shared details about the specific restructuring plans.
According to CEO Sharma, Xbox's profit margins are only about one-third to one-tenth of those of its competitors, and even with the release of the latest generation console, the installed base continues to shrink while the cost structure expands. Although they gambled on Game Pass and multi-platform development to aim for growth, they have not grown at the pace they expected.
Furthermore, as a result of aggressively expanding its game studios, Xbox has found itself competing not only with major publishers but also with small independent studios, resulting in a loss of 64 cents for every dollar invested. Therefore, CEO Sharma concluded that 'our company is not the ideal environment for all types of studios, and it is impossible to own all the excellent independent studios,' and decided to divest some studios.
Microsoft is also implementing layoffs in other divisions, including Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios. These layoffs will result in approximately 3,200 employees being laid off throughout fiscal year 2027. On the day of the announcement, approximately 1,600 people were laid off. It has been stated that these layoffs will not result in the cancellation of any games or projects that have already been announced.
Regarding Mojang, the developer of 'Minecraft,' and King, the developer of 'Candy Crush,' CEO Sharma stated, 'They are our largest studios in terms of monthly active players and are making a significant contribution to Xbox.'
Furthermore, CEO Sharma announced that they will also be 'resetting' the platform. He said that in some departments within the company, operations have formed as many as 14 layers of management, and that this complexity is slowing down decision-making and blurring the lines of responsibility. Therefore, they will reduce the management layers to a maximum of 5 layers, and ideally to 3 layers, and reorganize into a flatter organization centered on individual contributors who focus on development, leaders who remain deeply involved in operations while developing teams, and direct accountants who are responsible for important decisions and results.
In addition, for the first time, the Xbox division has appointed a Chief Operating Officer (COO) who will be responsible for the profit and loss across all businesses, including content, hardware, platform, and services. This will ensure clear investment decisions, lessons learned from successes and failures, and accountability for results. Helen Chang, who has worked in the Xbox division for nearly 20 years and held multiple positions, has been appointed to this role.
Microsoft's Chief Human Resources Officer, Amy Coleman, stated, 'Our business is changing as the world around us changes. Technology is changing faster than I have ever seen it in my time here. Customer needs are changing, and so are the business models that meet them. So we must transform the very way we do things—what we do, where we focus, and how we are organized. Companies cannot choose whether their industry changes or not; they can only choose whether they adapt to change. So we need to re-evaluate our resources and roles and change the way we do things in order to deliver the greatest value to our customers.' Coleman also added that 'the jobs being cut will not be replaced by AI.'
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