Xbox cuts 3,200 jobs in major restructuring, aims to return to growth

Microsoft began a sweeping Xbox restructuring that will eliminate about 3,200 roles across fiscal 2027, including roughly 1,600 immediate cuts, as the company tries to pull a video game business it says is growing too slowly and earning too little.

Xbox chief Asha Sharma called it “the most significant restructure in Xbox history” and said the unit operates at margins that are 3 to 10 times lower than comparable platform and publishing businesses. In a memo describing the overhaul, Sharma said Xbox has been losing 64 cents for every dollar invested in a typical year and said the company will “return to growth in 2027.” The plan also adds a new chief operating officer with end-to-end financial responsibility and aims to flatten management from as many as 14 layers to no more than five.

The cuts are part of a broader Microsoft reduction of about 4,800 jobs worldwide, with Xbox accounting for roughly 1,600 of the immediate eliminations. The changes reach across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang and Xbox Game Studios, underscoring how deeply the restructuring is reaching into Microsoft’s gaming portfolio.

Four studios are leaving Xbox to new management. Compulsion Games and Double Fine Productions will become independent studios and keep their intellectual property and catalog. Ninja Theory and Undead Labs have entered terms to join new ownership, with funding to complete and grow Senua and State of Decay 3. In France, Arkane management is beginning required consultation with its Works Council over strategic options, a sign that the restructuring is still working through the legal and labor steps that come with a cross-border reorganization.

The timing lands as Microsoft keeps shifting resources toward artificial intelligence, a priority that is reshaping budgets across the company. For Xbox, the message is stark: the platform still has ambition to expand beyond any single device, but the economics of game development, studio upkeep and subscription growth have to catch up. The layoffs and studio changes suggest Microsoft is trying to force that balance sooner rather than later, even if it means breaking apart parts of the business to make the rest scale.