Microsoft will cut about 3,200 jobs across its Xbox gaming business as part of a major restructuring aimed at improving performance and preparing the division for long-term growth.
The overhaul, announced on Monday, July 6, 2026, begins with the immediate elimination of about 1,600 positions. It also includes the transfer of four Xbox game studios to new ownership as Microsoft streamlines its gaming operations.
Xbox Chief Executive Officer Asha Sharma said the decision followed a review of the business, which has struggled with rising costs, weaker-than-expected growth and declining profitability despite heavy investment in Game Pass, multi-platform publishing and content development.
She also blamed the prolonged slump in the global gaming hardware market for worsening the division’s challenges.
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According to Sharma, the restructuring will focus on strengthening Xbox’s content portfolio, platform strategy and operational efficiency.
She said the layoffs were driven by business realities and not the performance or commitment of affected employees, adding that the changes are intended to build a stronger Xbox for the future.
In a separate memo, Microsoft’s Chief People Officer, Amy Coleman, said the job cuts were part of broader efforts to realign the company’s workforce with changing business needs.
Coleman stressed that the affected roles were not being replaced by artificial intelligence, although AI is reshaping how work is carried out across the technology industry and will require employees to continue developing new skills.
The restructuring marks Microsoft’s latest effort to streamline its gaming business as it responds to changing market conditions and intensifying industry competition.