Microsoft employees are bracing for more layoffs. On Monday, July 6, the tech giant said it plans to cut around 4,800 jobs, or about 2.1 per cent of its global workforce. The fresh round of layoffs is linked to a major overhaul of its Xbox gaming business, including the closure of up to five studios, as the company looks to improve returns after years of heavy investment in the division.<\/p>\n
Reports suggest the Xbox restructuring will affect around 3,200 jobs, including about 1,600 employees who were laid off on Monday. Microsoft has invested tens of billions of dollars in expanding Xbox, including its acquisition of Activision Blizzard. However, it continues to fall behind Sony\u2019s PlayStation and Nintendo, prompting the company to rethink its gaming strategy.<\/p>\n
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When it comes to capturing the market, the tech giant has increasingly focused on making its games available across multiple platforms instead of relying on console-exclusive titles to boost Xbox hardware sales. According to a note to employees from Xbox chief Asha Sharma, the restructuring will see Xbox divest four of its game studios.<\/p>\n
Consequently, South of Midnight developer Compulsion Games and Psychonauts creator Double Fine Productions will become independent studios. Meanwhile, Ninja Theory and Undead Labs will be spun off to focus on expanding the Senua and State of Decay franchises, Sharma said. She added that Arkane Studios, known for Dishonored and currently developing a game based on Marvel\u2019s Blade, has begun consultations with its workers\u2019 union in France to explore future options.<\/p>\n
Why is Microsoft cutting jobs?<\/p>\n
The job cuts come as the company accelerates its spending on artificial intelligence (AI). Like other tech giants, Microsoft is investing heavily in AI infrastructure, and the industry\u2019s total AI spending is reportedly expected to exceed $700 billion this year. Considering the massive investments, companies including Amazon and Meta have also cut thousands of jobs to balance rising AI costs.<\/p>\n
Microsoft\u2019s Chief People Officer Amy Coleman, in a memo to staff, said the layoffs were aimed at focusing Microsoft\u2019s \u201cpeople, investments, and energy on the priorities that will keep Microsoft positioned to deliver for customers in a fast-changing industry.\u201d<\/p>\n
The restructuring comes just days after Microsoft unveiled Microsoft Frontier Company, a new business unit backed by $2.5 billion that will help large enterprises deploy customised AI solutions, underscoring the company\u2019s continued push to expand its AI business.<\/p>\n
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Though there are apprehensions that laid-off staff will be taken over by AI. Coleman dispelled such concerns by saying that the eliminated roles were not being replaced by AI. However, she acknowledged that AI is changing how work is done across the company. \u201cThe roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done,\u201d Coleman wrote.<\/p>\n
Coleman also warned employees that \u201cthere will be more changes ahead\u201d as other parts of Microsoft\u2019s business undergo similar restructuring.<\/p>\n
According to analysts, the layoffs appear to be part of a broader effort to control costs and shift resources toward AI rather than a reaction to weak business performance. Investors are now more interested in whether Microsoft\u2019s AI investments can generate enough revenue to justify their growing costs.<\/p>\n
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