Microsoft has cut 4,800 roles, approximately 2.1% of its global workforce, in a sweeping restructuring that targets its commercial business and Xbox division, as the company admits it cannot keep pace with the speed of technological change.
The cuts fall hardest on the newly created Microsoft Commercial Business (MCB) and the Xbox gaming division, which will lose 3,200 positions during fiscal year 2027. Of those, 1,600 layoffs took effect Monday. Four game studios, Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs, have been spun off. Compulsion Games and Double Fine will operate independently; Ninja Theory and Undead Labs will move to new ownership. All intellectual property and upcoming titles will transfer with their respective studios.
“The way technology is built, deployed, and used is transforming faster than at any point in my time here,” said Amy Coleman, Microsoft’s human resources chief and a 17-year company veteran, in an internal memo. “That means we will need to adjust resources and roles and shift how we operate so we can have the greatest impact for our customers.”
A Company Struggling to Keep Up
Microsoft’s stock has fallen nearly 25% over the past 12 months, a slide driven by investor unease about the company’s massive AI infrastructure spending (US$190 billion, approximately £151 billion, in 2026 alone) and uncertainty about returns on that investment.
The Xbox division’s struggles are particularly acute. “The Xbox business is not healthy,” said Asha Sharma, the newly appointed Xbox division chief, in a candid internal note. Sharma announced the appointment of the division’s first-ever chief operating officer and said Microsoft would stop its strategy of acquiring every promising independent game studio. “It is neither possible nor desirable,” she said. “History is full of companies that mistake longevity for inevitability. We will not be one of them.”
The cuts span Activision, Bethesda/ZeniMax, Blizzard, King, Mojang, and Xbox Game Studios, with all teams being directed to shift resources toward higher-priority projects.
AI and the Future of Work
Coleman was explicit that the eliminated roles are not being directly replaced by AI. “The roles eliminated today are not being replaced by AI,” she said. “At the same time, what is true is that AI is changing how work gets done. Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves.”
The restructuring coincides with the launch of Microsoft Frontier Company, a new subsidiary dedicated to helping enterprise customers deploy AI and realize returns on their technology investments, a tacit admission that even Microsoft’s own customers are struggling to make the AI pivot work.
Sources: Microsoft says the world is changing faster than it can keep up as it guts commercial, Xbox teams (The Register, July 6); Microsoft internal memos from Amy Coleman and Asha Sharma (as reported by The Register)