Microsoft to Cut 4,800 Jobs, Including 1,600 in Xbox, and Reduce Division Headcount by 20 Percent by 2027

Microsoft is eliminating 4,800 positions company-wide on July 6, 2026. More than 30 percent of the cuts fall in the Xbox division, where approximately 1,600 roles are being eliminated immediately. The Xbox unit will reduce its headcount by around 3,200 positions, or 20 percent, by the end of the financial year in July 2027.

Xbox CEO Asha Sharma said in an internal memo that the business operates at margins three to ten times lower than comparable platform and publishing companies. In a typical year the division lost 64 cents for every dollar invested, according to Microsoft. Platform teams are 40 percent larger than at the start of the current console generation.

Four studios are leaving Xbox. Double Fine Productions will return to founder Tim Schafer as an independent studio. Compulsion Games will return to founder Guillaume Provost as an independent studio.

Ninja Theory and Undead Labs are being sold to new ownership with funding to complete and grow their respective projects Senua and State of Decay 3. Arkane Studios management in France has begun required consultation with its Works Council to review potential strategic options. Mojang and King will now report directly to Sharma.

None of Xbox's first-party publicly announced games or projects are being cancelled, Microsoft said. The unit will reduce management layers to no more than five and, where possible, three, while cutting vendor spend by 50 percent. Helen Chiang has been promoted to chief operating officer with end-to-end profit-and-loss responsibility across content, hardware, platform, and services.

Dave McCarthy is retiring after 17 years with Xbox. Sharma said Xbox will invest as much in 2026 as it ever has and aims to return to growth in 2027.