PTC Web Desk: Microsoft-owned Xbox has announced a major restructuring that will see 3,200 employees lose their jobs over the next year. The decision is part of Microsoft's broader effort to reduce costs while increasing investments in artificial intelligence (AI).

According to Xbox CEO Asha Sharma, the company needs significant changes to improve its financial performance and prepare for future growth.

1,600 employees to leave first

The company will begin the layoffs immediately, with 1,600 employees leaving in the first phase. The remaining job cuts will take place during the 2026-27 financial year.

Along with reducing its workforce, Xbox will also shut down or sell four gaming studios and is preparing to separate from another studio as part of its restructuring plan.

This is an important email I sent today to all employees at XBOX:

Team,

We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include… — ASHA (@asha_shar) July 6, 2026

Why Xbox is cutting jobs

In a message shared with employees, Sharma said Xbox's current business model is not delivering healthy profits. She explained that the company is spending more than it earns, losing nearly 64 cents for every dollar invested. According to her, the decision is aimed at making the business financially stronger and is not a reflection of employees' performance.

Sharma also pointed out that the gaming industry is facing one of its toughest periods in recent years, especially in the hardware segment.

Major changes planned

Xbox plans to simplify its operations over the next few years. The company will reduce the number of management levels from as many as 14 layers to a maximum of five, and in some teams, only three layers will remain. The goal is to make decision-making faster and improve efficiency. Xbox will also reduce its spending on external vendors by 50 percent.

Another important change is giving greater support to independent game developers by offering better development tools and access to Xbox's gaming audience.

Mojang and King to report directly to CEO

Sharma announced that Mojang, the studio behind Minecraft, and King, the developer of Candy Crush, will now report directly to her. She said both studios have become major platforms with millions of active players and will play a key role in Xbox's future strategy.

Helen Chiang promoted as COO

As part of the restructuring, Xbox has appointed Helen Chiang as its new Chief Operating Officer (COO). She will oversee the company's content, hardware, platform, and services under a single operating model. Her responsibilities will include improving investment decisions and ensuring greater accountability across the business.

The Xbox layoffs are part of Microsoft's wider workforce reduction. Overall, the technology giant is expected to eliminate around 4,800 jobs as it shifts more resources toward artificial intelligence and streamlines operations.

Despite the layoffs, Sharma said Xbox will continue investing heavily in its gaming business. She believes the restructuring will help the company become stronger over the next decade by focusing on sustainable growth, faster decision-making, and better use of resources.

The company says its long-term goal is to build a more efficient organisation while continuing to create better gaming experiences for players and developers worldwide.

- With inputs from agencies

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