'This Is Painful': Xbox CEO Asha Sharma Announces 3,200 Job Cuts As Part Of Major 'Reset'
Xbox will cut 3,200 jobs throughout FY 2027 as part of its largest restructuring, with 1,600 layoffs taking effect now.
Published : July 7, 2026 at 9:27 AM IST
Hyderabad: A year after laying off over 9,000 employees, Microsoft is making further layoffs. The software maker is cutting around 4,800 employees, which makes up 2.1 per cent of its workforce. Most of the employees affected by these cuts are in Microsoft’s commercial sales business or the company’s Xbox division.
The layoffs at Xbox include 1,600 role eliminations. However, it will witness around 1,600 more layoffs later—bringing the total cutoffs at the gaming division to 3,200. Additionally, four studios will leave Xbox to new management.
This is part of a broader reorganisation designed to “reset” Xbox as it faces heightened competition, the company said Monday.
“Our business today is not healthy,” said a memo from Xbox CEO Asha Sharma, who took over the gaming division earlier this year. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”
Emphasising the efforts Xbox took over the years to expand, Sharma said that while the initiatives, including Game Pass and multi-platform portfolio, created value, they did not result in growth that was expected. Meanwhile, these efforts also weakened the core business for Xbox. So while the company added more teams, investment, and time, hoping for a better outcome, the industry now faces the "most severe hardware crisis in its history", prompting a "reset".
This is an important email I sent today to all employees at XBOX:
— ASHA (@asha_shar) July 6, 2026
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…
Notably, just like the smartphone industry, the gaming industry is also facing headwinds because of soaring prices for console components. Asha Sharma said that a year-long restructuring creates additional challenges, and it is not possible to make all the necessary changes in a single day, which is why the company is only removing 1,600 employees while holding off on the rest until later this year.
"I know this is painful," Asha Sharma said while acknowledging the effects of layoffs on people and adding that the decision does not reflect their talent or dedication.
Asha Sharma's reset plan for Xbox
The Xbox CEO also shared a three-point plan for the gaming division, which includes resetting the content portfolio, resetting the platform, and resetting how the company operates.
Xbox will overhaul its studios, management, and operations to improve efficiency and profitability. The company will spin off Compulsion Games and Double Fine Productions as independent studios, while Ninja Theory and Undead Labs will move to new owners with funding to complete their upcoming games.
It is also reviewing strategic options for Arkane in France and making job cuts across Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, although no publicly announced first-party games have been cancelled.
The company will flatten its organisational structure by reducing management layers, simplifying development processes, and cutting vendor spending. It is also creating a new Chief Operating Officer role, appointing Helen Chiang to oversee content, hardware, platform, and services under a single operating model.
The Xbox layoffs are part of broader job cuts at Microsoft. Chief people officer Amy Coleman said they were driven by changing customer needs and clarified that the eliminated roles were not being replaced by AI. The cuts follow voluntary buyout offers made to about 8,750 employees in May, with more than 30 per cent of eligible workers accepting them.
