Last month, Xbox executives
laid out some “hard truths” about Microsoft’s struggling gaming division that they said would require a difficult “Xbox reset.” This morning, Microsoft revealed the brutal shape of that “reset,” announcing plans for 3,200 layoffs and the divestment of five smaller studios that the company has spent years acquiring and shepherding.
Half of those 3,200 layoffs are effective today,
new Xbox CEO Asha Sharma wrote, while the other half will come by the end of Microsoft’s 2027 fiscal year (which runs through June 30, 2027). CNBC cites “a person familiar with the matter” in reporting that these cuts amount to roughly 20 percent of the Xbox division.
When combined with 1,600 newly announced layoffs across the rest of Microsoft, the company as a whole is letting go of just over 2 percent of its workforce. But
The Seattle Times reports that Microsoft’s total headcount has remained relatively stable thanks to other hiring.
The newest Xbox cuts follow a string of Microsoft gaming layoffs in recent years, including
1,900 jobs cut in the wake of the Activision Blizzard acquisition and 650 jobs cut later in 2024. In July of 2025, another round of layoffs led to the cancellation of a number of in-development gaming projects at Xbox such as Perfect Dark and Everwild. In today’s announcement, though, Sharma said that “none of our first party publicly announced games or projects are being cancelled as part of these reductions.”
Sharma characterized these Xbox staffing reductions as a way to “simplify” a division that has become bloated with complicating layers of middle management. Some decisions in the gaming division currently pass through “14 layers” of decision-makers, Sharma said, before promising that the new Xbox will be a “flatter organization” with “no more than 5, and where possible, 3” layers of management involved in any decision.
<small>Source: Ars Technica</small>
