Microsoft to cut 4,800 jobs, overhaul Xbox unit

Microsoft said Monday it would cut 4,800 jobs, or about 2.1 per cent of its global workforce, as part of a restructuring that includes an overhaul of its Xbox gaming business and ‌the divestment of up to five studios. The company is looking to boost returns after years of heavy investment in the division.

The restructuring of the gaming division will involve 3,200 job cuts, including laying off 1,600 employees on Monday.

Despite spending tens of billions of dollars to expand Xbox, including through its blockbuster acquisition of Activision Blizzard, Microsoft has struggled to narrow the gap with Sony’s PlayStation and Nintendo, ​prompting a broader rethink of its gaming business.

The company has increasingly shifted its ​strategy toward distributing its games across more platforms rather than relying on console-exclusive titles to drive Xbox hardware sales.

The Xbox restructuring will involve the divestment of four studios, the division’s new head, Asha Sharma, said in a note to employees.

Montreal-based South of Midnight ​producer Compulsion Games and Psychonauts maker Double Fine Productions will become independent studios. Ninja Theory and Undead Labs will ⁠be spun off to develop the upcoming Senua and State ⁠of Decay 3 games, respectively, Sharma said.

Management at Arkane Studios, which developed Dishonored and ‌is working on a game based on Marvel Comics character Blade, has begun consultations with its union in France to review options, she added.

“Our business today is not healthy,” Sharma said in the memo. “We are operating at margins that are three to 10 times lower than comparable platform and publishing businesses.”

In a statement posted on social media, Compulsion Games said it would retain the rights to its games, including South of Midnight.

“We’re grateful for the years we spent with Xbox, for the support they provided our team, and for the opportunity to bring these games to players around the world,” it said. “Our immediate priority is to support our team throughout this transition period.”

AI-driven efficiency push

Big Tech’s historic spending on AI, expected to exceed $700 billion US this year, is increasing pressure on companies to show returns from the technology and offset the rising cost of deploying it across their businesses. Amazon and ⁠Meta have also laid off thousands of employees this year.

Microsoft’s chief people officer Amy Coleman, however, told employees in a memo that “the roles eliminated today are not being replaced by AI.”

“At the same time, what  is  true is that AI is changing how work gets done.”