A large-scale job cut at Microsoft is happening now — and this is just the start.

Microsoft’s Xbox Division Set for Major Overhaul and Job Cuts

Under the fresh leadership of Asha Sharma, Microsoft is gearing up for significant changes within its Xbox division, including substantial layoffs. The restructuring plan is set to commence as soon as Monday.

Reports indicate that around 3,200 employees within the Xbox division are facing layoffs, with 1,600 already cut on Monday, and the remaining layoffs scheduled over the next year. This move is part of a broader trend across Microsoft, with 6,400 total job cuts anticipated, impacting areas beyond Xbox.

Amy Coleman, Chief Human Resources Officer, acknowledged that while AI is transforming workplace efficiency, it is not the driver behind current job reductions. “We are still at the beginning of this journey, and more adjustments will follow across various parts of our business,” she noted in a memo.

Moreover, Xbox is contemplating a shift away from certain growth strategies implemented by former CEO Phil Spencer. This includes efforts to sell or attempt to sell five studios, which were acquired to expedite growth. Studios such as Ninja Theory, Undead Labs, Double Fine, and Compulsion Games are on the list, alongside a fifth studio in Lyon, France, which is still in the consultation phase due to local labor laws.

Sharma commented on the acquisitions, stating they created value but did not grow as anticipated. In fact, “In a normal year, Xbox would have lost 64 cents on every dollar invested,” he added. Several internal studios, including Activision and Bethesda/ZeniMax, will also feel the impact of this restructuring. Notably, Mojang (Minecraft) and King (Candy Crush) will now report directly to Sharma, as they contribute significantly to the company’s revenue.

This announcement arrives shortly after Microsoft launched its first voluntary retirement program for eligible older employees, with reports suggesting 30% of them opted in. Current data indicates the company has roughly 125,000 employees in the U.S., with around 7% qualifying for the buyout.