Xbox to Cut 3,200 Jobs and Spin Off Four Studios After Revenue Decline

Xbox is laying off roughly 3,200 employees, or 20 percent of its staff, and spinning off four studios in the largest restructuring in the unit's history. Of the total, 1,600 employees will be affected immediately and the remaining 1,600 will be cut over the next year.

The reductions form part of a broader Microsoft workforce cut announced Monday that will impact about 2 percent of its 228,000 employees.

Asha Sharma, who succeeded Phil Spencer as Xbox chief executive in February, outlined the moves in a Monday memo to staff. She stated that Xbox operating margins are three to 10 times lower than comparable businesses and that the unit spread resources too thin across multiple bets.

The console represents 80 percent of Xbox business, and the new plan returns focus to that core while moving to a centralized studio model and removing management layers.

Microsoft reported a 7 percent decrease in quarterly gaming revenue, including a 33 percent drop in Xbox hardware revenue and a 5 percent decline in content and services. Despite more than $20 billion invested in content and hardware over the past five years, excluding Activision Blizzard, Xbox annual revenue has fallen by nearly half a billion dollars.

Helen Chiang has been named chief operating officer, the first in that role, with accountability for profits and losses across content, hardware, platform, and services.

King and Mojang Studios now report directly to Sharma. Microsoft eliminated about 15,000 jobs across the company in 2025. Its shares have declined double digits over the past year. Sharma lowered Game Pass prices, ended the AI Gaming Copilot feature for consoles, scrapped older marketing campaigns, and revived titles such as Gears of War: E-Day.