Microsoft has announced another massive round of layoffs — cutting approximately 4,800 employees — while simultaneously selling off four Xbox studios in what the company is calling a “reset” of its gaming division.
July 10, 2026 — The layoffs, affecting roughly 2.1 percent of Microsoft’s global workforce, are heavily concentrated in the commercial sales division and Xbox. Around 1,600 Xbox employees were let go today, with plans to cut a total of 20 percent of Xbox jobs by the end of the fiscal year in July 2027.
What Happened
In an internal memo, Chief People Officer Amy Coleman cited the rapid transformation of the technology industry and the growing impact of AI as key drivers. “The roles eliminated today are not being replaced by AI,” Coleman emphasized. “At the same time, what is true is that AI is changing how work gets done.”
This follows last year’s cuts of roughly 9,100 employees. Microsoft had attempted to reduce headcount voluntarily through a retirement program — over 30 percent of eligible employees participated — but it wasn’t enough to avoid today’s deeper cuts.
Xbox Studios Being Sold
As part of the restructuring, four previously acquired game studios are being spun off:
- Double Fine — Returning to founder Tim Schafer
- Compulsion Games — Returning to founder Guillaume Provost
- Ninja Theory (Hellblade series) — Being sold with agreements to continue Senua’s saga
- Undead Labs (State of Decay) — Being sold with State of Decay 3 still in development
Microsoft is also evaluating options for Arkane Studios (makers of Blade), which has reportedly faced delays and budget overruns on its current project.
Why This Matters
Xbox CEO Asha Sharma described this as “the most significant restructure in Xbox history.” The company is moving away from acquiring smaller independent studios and refocusing on bigger franchises. “It is neither possible nor desirable to own every great independent studio,” Sharma wrote. “In a typical year, we lost 64 cents for every dollar we invested.”
Mojang (Minecraft) and King (Candy Crush) will now report directly to Sharma, signaling a reorganization of Microsoft’s gaming hierarchy.
FAQ
Q: Will already-announced Xbox games be canceled?
A: Microsoft says none of its first-party publicly announced games or projects are being canceled as part of these reductions.
Q: How many people have been laid off at Microsoft in total?
A: Over the past two fiscal years, Microsoft has eliminated roughly 13,900 positions across multiple rounds, including today’s cuts.
Q: Are new games still coming from the sold studios?
A: Yes. Agreements are in place to ensure titles like State of Decay 3 and future Ninja Theory projects continue shipping.
Source: The Verge | July 10, 2026