AI changing how work gets done, says CPO
Microsoft announced Monday it is cutting 4,800 jobs — about 2.1 percent of its global workforce — as part of a restructuring that includes a major overhaul of its Xbox gaming division and the divestment of several studios.
The gaming division alone will lose 3,200 positions, including 1,600 cut immediately on Monday, CBC News reported. The remaining Xbox cuts will roll out over the coming months; CNBC reported those additional 1,600 job losses will occur throughout Microsoft's 2027 fiscal year, amounting to roughly one-fifth of the division's total staff.
Despite spending tens of billions of dollars expanding Xbox — including its acquisition of Activision Blizzard — Microsoft has continued to lose ground to Sony's PlayStation and Nintendo, CBC News reported, prompting the company to shift toward distributing its games across more platforms rather than relying on console exclusives to sell hardware.
Xbox's new division head, Asha Sharma, told employees in a memo that the unit's economics have fallen well short of comparable businesses. Sharma wrote that Xbox is "operating at margins that are three to 10 times lower than comparable platform and publishing businesses.”
She also told staff, per CNBC, that spreading the restructuring over a year creates added difficulty for employees, but that "it is not possible to make all the necessary changes in a single day."
AI pressure looms large
Microsoft's chief people officer, Amy Coleman, told employees the job cuts announced Monday are not being replaced by AI, though she said AI is changing how work gets done, according to CBC News.
The cuts come as Microsoft and other major tech firms face pressure to show returns on massive AI investment. Big Tech spending on AI is expected to top $700 billion US this year, and both Amazon and Meta have laid off thousands of employees in 2026 as well.
Gil Luria, managing director at D.A. Davidson, told CBC News that Microsoft has been managing down its workforce to help fund its AI investments, allowing it to grow revenue while maintaining margins. Speaking with CNBC, Luria was more pointed about Xbox's position within the company, calling the gaming business "almost irrelevant" and saying "it is very possible" Microsoft could eventually spin it off entirely.
Monday's cuts follow a voluntary retirement program Microsoft introduced earlier this year, offering buyouts to about 7 percent of its U.S. workforce, or roughly 9,000 employees, according to CBC News.
CNBC reported that more than a third of eligible employees accepted the offer, and that Coleman told staff the company would keep exploring similar programs going forward. CBC News noted Microsoft has a pattern of cutting jobs near the end of its fiscal year in June as it sets spending plans for the year ahead.
As part of the restructuring, Microsoft is divesting four studios, CBC News reported. Montreal-based Compulsion Games and Double Fine Productions will become independent companies again. Ninja Theory and Undead Labs will be spun off under new ownership.
A fifth studio, France-based Arkane Studios is not being spun off outright. Management has begun consultations with Arkane's union in France to review its options, CBC News reported.
