Microsoft cuts 4,800 jobs, Xbox hit by 1,600 layoffs in major reset
Xbox is cutting about 3,200 roles across FY27, but the bigger player-facing shift is which studios got spun out, sold, or put under review. Microsoft says no announced first-party games were canceled.
Microsoft cut 4,800 jobs on July 6, with about 1,600 of them coming out of Xbox immediately and another 1,600 Xbox roles slated to disappear over the rest of FY27. In an internal memo, Xbox called it the “most significant restructure” in the division’s history, and framed the reset around a blunt verdict on the business: Xbox said its gaming arm is “not healthy.”
Microsoft said no previously announced first-party games or projects were canceled because of the staffing reductions. The company also said content spending in the next fiscal year will stay roughly flat versus the prior record year while being redirected toward priority franchises such as Minecraft and The Elder Scrolls.
Compulsion Games and Double Fine Productions are returning to management as independent studios, along with their IP, catalog, and runway for future games. Ninja Theory and Undead Labs have entered terms to join new ownership, with funding attached to finish and grow Senua and State of Decay 3. In France, Arkane’s management has started the required consultation with its Works Council to review strategic options.
Microsoft said Xbox’s margins run 3 to 10 times lower than comparable platform and publishing businesses, and that the division lost 64 cents for every dollar invested in a typical year. Variety put the four departing studios at about 350 people, while up to another 1,250 Xbox roles could still be eliminated over the next year.
CNBC put Microsoft shares down 19% in 2026 when the layoffs landed, and NBC News put earlier voluntary buyouts at about 7% of its U.S. workforce, roughly 9,000 employees. NBC News also put Microsoft’s 2026 AI infrastructure spending at $190 billion.
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