Microsoft has cut around 4,800 roles, representing nearly 2.1% of its global workforce, in the latest round of layoffs at the company. The move comes amid growing concerns that artificial intelligence is accelerating workforce restructuring across major technology firms.
According to internal memos shared with Microsoft employees, the layoffs will affect Xbox and commercial sales most heavily. Xbox alone is expected to lose around 1,600 employees as part of a major restructuring effort.
In an internal message, Microsoft executive Coleman said the company’s business is changing because the world around it is changing. He noted that the way technology is built, deployed, and used is evolving faster than at any point in his time at the company.
Coleman added that customer needs are shifting, business models are changing, and the nature of work itself must evolve accordingly. This includes reassessing what teams do, where Microsoft focuses its resources, and how the company organizes its operations.
Companies do not get to choose whether their industry changes; they only get to choose whether they change with it, Coleman wrote, stressing that Microsoft needs to adjust resources, roles, and operating models to deliver greater impact for customers.
Although the layoffs have intensified concerns about AI replacing workers, Coleman emphasized that the eliminated roles “are not being replaced by AI.” However, he acknowledged that artificial intelligence is changing how work gets done.
He explained that some daily tasks can now be automated, which means employees must continue learning, developing new skills, and adapting as work evolves.
The layoffs come shortly after Microsoft launched Microsoft Frontier Co., a new business unit focused on helping enterprise clients deploy AI solutions using the company’s existing AI tools and forward-deployed engineering teams. The initiative is backed by a $2.5 billion investment, highlighting a broader trend in the technology sector where job cuts are increasingly taking place alongside rising AI spending.
Commenting on the Xbox layoffs, Coleman said Microsoft is restructuring the business to position it for long-term success. He added that engineering teams across the company will also evolve their structures and priorities to meet customer needs and support future innovation.
Of the 4,800 roles being cut, around 1,600 will come from Xbox, while total reductions within the gaming division are expected to reach nearly 3,200 jobs through fiscal year 2027, according to an internal email from Asha Sharma, CEO of Xbox.
Sharma described the move as “the most significant restructure in Xbox history. She said the business is currently not healthy, with margins estimated to be three to ten times lower than comparable platform and publishing businesses.
She added that Xbox had made several strategic bets in recent years, including its monthly subscription service Game Pass, portfolio expansion, and investment in multi-platform publishing. However, these initiatives did not grow at the expected pace, weakening the core business despite increased teams and investment.
The latest Microsoft layoffs reflect a broader shift across the technology industry, as companies seek to reduce costs, redirect resources toward artificial intelligence, and restructure their workforces around new business priorities.
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