Microsoft Cuts 4,800 Jobs as Asha Sharma Resets 20% of Xbox Gaming Division

Microsoft has announced sweeping layoffs affecting 4,800 employees , roughly 2.1 percent of its global workforce, as part of a sweeping restructuring of its Xbox gaming division. The cuts mark what Xbox CEO Asha Sharma described as the most significant restructure in the division's history.

Of the total layoffs, approximately 3,200 jobs will be eliminated within Xbox itself, amounting to about one fifth of the division's staff. The remaining reductions fall largely within Microsoft's commercial and sales business . Around 1,600 Xbox employees are losing their roles this week alone, with the rest to be cut over the coming fiscal year.

As part of the overhaul, four game studios, Ninja Theory , Undead Labs , Compulsion Games , and Double Fine Productions , will either be sold or spun off into independent companies. A fifth studio, Arkane Lyon , known for Dishonored and Deathloop , is entering a review process that could ultimately lead to its closure.

In an internal memo, Amy Coleman , Microsoft's chief people officer, told staff that "the way technology is built, deployed, and used is transforming faster than at any point" in her time at the company, framing the cuts as necessary adaptation to industry change. Sharma was more blunt, telling employees that "our business today is not healthy" and that Xbox currently operates at margins three to ten times lower than comparable businesses.

The layoffs come despite Microsoft posting strong overall financial results, with Q3 FY2026 net income reaching 31.8 billion dollars , up 23 percent year over year. However, Xbox content and services revenue fell 5 percent in the same quarter, underscoring that the gaming unit, not the parent company, is under financial strain.

Microsoft's stock has fallen 19 percent in 2026, making it the worst performing megacap tech stock this year, as investors question whether the company's massive spending on artificial intelligence infrastructure will generate proportionate returns. The Xbox reset is being positioned as an effort to restore growth and profitability by 2027 .