Microsoft Layoffs Hit 4,800 Workers as Xbox Reset Begins

Microsoft is laying off around 4,800 employees today, about 2.1% of its global workforce, as the company opens its new financial year with a restructuring concentrated in its Commercial and Xbox divisions. Chief people officer Amy Coleman set the frame for staff in a memo Monday, warning that Microsoft is “still early on this journey, and there will be more changes ahead.”

The cuts come roughly a year after Microsoft’s last major layoff round and on the same day Xbox chief Asha Sharma told gaming employees about a separate restructuring of the gaming division under her leadership. Coleman’s memo attributes most of today’s losses to Microsoft’s Commercial Business and to Xbox, and notes that engineering teams across the company will “evolve their structure and priorities to meet customer needs.”

The Numbers in Coleman’s Memo

The memo, posted in full to Microsoft’s company blog under Coleman’s byline, opens with the figure that runs through everything else. “Today we are eliminating around 4,800 roles, about 2.1% of our global workforce,” she wrote. Coleman positioned it as one step in a wider restructuring, not a single correction, and asked employees to read today’s news alongside the “why” she lays out further down in the memo.

• 4,800 roles eliminated in the announcement
• 2.1% of Microsoft’s global workforce
• 4,000-plus employees redeployed into new roles over the past year
• 500 redeployed this month
• 30%-plus of eligible US employees took voluntary retirement

Coleman made a second explicit framing call in the memo. “The roles eliminated today are not being replaced by AI,” she wrote, before turning the sentence around. “At the same time, what is true is that AI is changing how work gets done.” That pair of sentences, sent across the company while competitors’ layoff announcements frame round after round of cuts as AI-driven, is the one Coleman has chosen to repeat to staff and to the press.

Where the Cuts Land

Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it.

Amy Coleman, Microsoft’s chief people officer, located most of the changes inside the company in the paragraph that followed her memo’s opening. “Today’s changes mostly fall within our Commercial and XBOX organizations,” she wrote, framing the Commercial Business cuts as a continuation of Microsoft’s Frontier Company announcement the previous week, an effort to embed engineers inside customers’ tech deployments.

The Xbox piece is sized far larger than the memo’s tone suggests. Per Sharma’s separate memo, 1,600 positions at Xbox are being cut immediately, with approximately 3,200 gaming jobs set to be shed over the coming fiscal year. That sum comes on top of four gaming studios being spun off or sold and a fifth headed for review under the Xbox reset.

Xbox’s Deeper Reset

Asha Sharma, who became Xbox’s chief in February after longtime head Phil Spencer retired, told gaming employees on Monday that the division she inherited was “not healthy” and that its profit margins sat “3-10 times lower” than rivals. Sharma’s memo gives Xbox its clearest public admission yet of how far the unit trails its competitors since the 2024 closing of Microsoft’s $68.7bn Activision Blizzard acquisition.

• Compulsion Games will become independent, retaining its IP and game catalog
• Double Fine Productions will become independent, retaining its IP and game catalog
• Ninja Theory has entered terms to join new owners with funding to continue current projects
• Undead Labs has entered terms to join new owners with funding to continue current projects
• Arkane is starting a required consultation with its works council in France over what Sharma called “potential strategic options”

History is full of companies that mistake longevity for inevitability. We will not be one of them.

Sharma’s memo to Xbox staff, sent out the same morning as Coleman’s, lays out the most candid recent framing of the unit’s troubles Microsoft has published under her leadership. The memo also confirms what Coleman’s did not: that the four gaming studios are being moved to “operate under new management,” not laid off, and that their intellectual property and projects are the parts Microsoft is keeping.

The cloud push is one of the few Xbox growth lanes Microsoft has pointed to since the 2024 deal, and it leans on Xbox Cloud Gaming arriving on cheaper hardware in new markets. That route runs alongside the console business Sharma is restructuring rather than winding down.

Cushioning the Cuts

Microsoft has built out a redeployment track Coleman’s memo emphasizes as much as the cuts themselves. Over the past year, the company redeployed more than 4,000 employees into new roles, including another 500 this month, Coleman wrote. The 4,000 figure is the one Microsoft has been pushing to staff channels since Monday morning, and the one Coleman asked employees to keep in mind as the layoff details and the Xbox 20% target circulated across the company.

Microsoft also leaned on a voluntary retirement program it hoped would limit forced cuts. “More than 30% of eligible employees chose to participate in our recent voluntary retirement program,” Coleman wrote, and Microsoft said it “will continue exploring similar approaches in the future.”

Eligibility for the voluntary program is restricted to US employees whose combined age and years of service total 70 or more. The package includes five years of healthcare access, a lump-sum cash severance payment, and six months of vesting on unvested stock.

Coleman ended the memo with a direct ask of the people staying on. “Reach out and check in on your colleagues,” she wrote. “Use your network to bring people together, share what makes them exceptional, and help create connections to opportunities that might not happen otherwise.” It is a common note inside large-scale layoff memos, and one typically repeated only when the network does not absorb the first wave.

A Year After 9,100 Cuts

A year ago, Microsoft cut around 9,100 positions in a round that, at the time, was the company’s most aggressive in the post-pandemic era. The 4,800 cuts on Monday do not match that scale but tighten the pattern: both rounds ran through Commercial and gaming, and Coleman’s memo frames them as adjacent steps in the same restructuring rather than separate events.

Coleman’s phrasing in Monday’s memo echoes the framing Microsoft used last year, that the company is rebuilding itself for “a fast-changing industry” rather than reacting to a single bad quarter. The 9,100 figure is now a marker employees use to gauge how far the “journey” Coleman has named has already run, and how much further she signalled is still to come.

Where the Money Is Going

The restructuring sits alongside a separate allocation of capital. Last week, Microsoft announced its Frontier Company initiative as a $2.5bn program to embed 6,000 engineers inside enterprise clients to speed up AI adoption. The Commercial cuts tie directly into that initiative: today’s reorganization shapes how Microsoft’s sales and engineering arms will work inside those customer engagements.

That commitment sits on top of Microsoft’s continuing spend on AI infrastructure, including the data centers and compute capacity Microsoft and its peers are funding with tens of billions of dollars.

Coleman’s “still early on this journey” line, written Monday for staff, runs through both her own memo and the Xbox material. The 4,800 names in her note are the first wave the company is asking to take that line at face value.