Portugal Colonial - Microsoft cuts 4,800 jobs as it revamps Xbox

The cuts include the deepest overhaul in Xbox's history, with approximately 3,200 gaming jobs to be shed over the coming fiscal year, four game studios being spun off or sold, and a fifth entering a review process that could lead to closure, the company said.

The announcement is the latest in a string of mass layoffs by the technology giant as it spends massive amounts of money to stay in the artificial intelligence race, with companies investing tens of billions of dollars in AI-ready data centers and computing power.

"Our business is changing because the world around it is changing," Amy Coleman, Microsoft's executive vice president, wrote in a memo to all employees.

"Companies don't get to choose whether their industry changes; they only get to choose whether they change with it."

Coleman said the layoffs fell mostly within Microsoft's commercial business and Xbox.

She said the eliminated roles were "not being replaced by AI," but acknowledged that automation is reshaping how work is done across the company.

On the commercial side, she said the cuts would build on Microsoft's $2.5 billion push, announced last week, to embed 6,000 engineers with major clients to accelerate AI adoption.

At Xbox, CEO Asha Sharma told employees in a separate memo that 1,600 positions were being cut immediately, with the rest to follow through fiscal year 2027.

Xbox has been through successive rounds of cuts since Microsoft's $68.7 billion acquisition of Activision Blizzard in 2024 after a long review process by regulators over competition concerns.

- 'Not healthy' -

Sharma described Xbox's business as "not healthy," with profit margins "3-10 times lower" than rivals.

She said the division had bet on Game Pass, its Netflix-like subscription service, to drive growth, but the service lost millions of subscribers after a subscription price hike last October, forcing the company to reverse course and slash the fee.

Sharma succeeded longtime Xbox chief Phil Spencer, who retired in February, and has pledged to return the division to growth by 2027.

"History is full of companies that mistake longevity for inevitability," she wrote. "We will not be one of them."

Four studios will leave Xbox as part of the restructuring.

Compulsion Games, known for "South of Midnight" and Double Fine Productions, maker of "Psychonauts," will become independent, retaining their intellectual property and game catalogs.

Ninja Theory, the makers of "Hellblade," and Undead Labs, that made "State of Decay," have entered terms to join new owners with funding to continue their current projects.

In France, Arkane's management is beginning a required consultation with its Works Council to review what Sharma called "potential strategic options" -- a process that could result in further closures or a sale.

Microsoft on June 25 said it will raise the price of its Xbox video game consoles worldwide as a component-cost surge fueled by AI affects the industry.

Sony and Nintendo have also raised the prices of their game consoles, and Apple announced substantial increases for its Macs and iPads.

P.Cavaco--PC