Microsoft lays off nearly 5K workers, most of them at Xbox: Our business today is not healthy

Microsoft is axing 4,800 employees, most of them from its Xbox division, as it and the rest of the tech industry seek to adapt to the AI era.The cuts come as the software giant has heavily invested in artificial intelligence after years of pouring cash into gaming.“Our business is changing because the world around it is changing.The way technology is built, deployed, and used is transforming faster than at any point in my time here,” Amy Coleman, Microsoft’s chief people officer, wrote in a Monday memo to employees.The layoffs included 1,600 Xbox employees who were immediately let go, with another 1,600 set to be axed over the rest of Microsoft’s fiscal year, according to Xbox Chief Executive Asha Sharma.“Our business today is not healthy,” she wrote employees, going on to list challenges like slow growth.“We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” Sharma added. “We must reset Xbox.”Microsoft – which became a dominant force in the video game arena with the landmark launch of the Xbox in 2001 – is also selling or spinning off four game development studios and weighing strategic options for a fifth, according to Sharma.The cuts account for 2.1% of Microsoft’s global workforce — and one-fifth of Xbox staffers.AI has been blamed for layoffs throughout the tech sector, which saw its worst start to the year in terms of employment since 2023.

The first three months of 2026 brought 52,050 tech layoffs — a 40% jump from the same period last year, according to executive coaching firm Challenger, Gray & Christmas – with AI increasingly being blamed for the cuts.The soon-to-be axed Microsoft employees won’t actually be replaced by AI, Coleman 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...