Microsoft announced major layoffs across its gaming division and other units on July 6, 2026. The cuts total 4,800 positions, or 2.1 percent of the global workforce. Xbox is divesting several studios as part of the reset.
Xbox CEO Asha Sharma said in an employee memo that the business is not healthy. She cited high costs, a small customer base, and insufficient growth in Game Pass and first-party games. Half of the 3,200 Xbox layoffs took effect immediately, with the rest expected by June 2027.
The company is also offloading Compulsion Games, Double Fine, Ninja Theory, and Undead Labs. Arkane Studios is reviewing strategic options. Sharma stated that no publicly announced first-party games or projects are being canceled.
An additional 3,200 jobs are being cut outside Xbox, mainly in the Commercial Business segment. Microsoft EVP Amy Coleman noted that the eliminated roles are not being replaced by AI, though she acknowledged automation trends.
Sharma described the moves as necessary to simplify operations and focus on larger franchises. The changes follow earlier layoffs in 2024 and 2025.
