MS to Lay Off 4,800 Employees... Major Overhaul of Xbox Division

Massive AI Investments Lead to Downsizing of Low-Profit Units
1,600 Employees Laid Off Immediately
Focus Shifts to Blockbuster Titles

Microsoft (MS) is set to lay off 4,800 employees worldwide and undergo a major restructuring of its gaming division, Xbox, as the burden of investment in artificial intelligence (AI) continues to grow. Within Xbox, approximately 3,200 employees—about 20% of its total workforce—will be laid off over the next year, and several affiliated game studios will either be sold or spun off.

MS Corporate Identity

According to Bloomberg and the Financial Times (FT) on July 6 (local time), MS announced that it would lay off about 4,800 employees globally. This represents approximately 2.1% of its total workforce. The layoffs will primarily affect the Xbox and commercial divisions.

Amy Coleman, MS Chief Human Resources Officer, stated in a memo to employees, "Today, we are eliminating 4,800 roles, which is about 2.1% of our global workforce," adding, "This action is intended to focus our people, investments, and energy on our top priorities to deliver value to customers in a rapidly changing industry."

The scale of restructuring is even greater at Xbox. Xbox plans to cut a total of 3,200 jobs over the next 12 months. Of these, 1,600 employees are being laid off immediately, with the remaining 1,600 to be reduced over the coming year.

This restructuring comes about three years after MS acquired Activision Blizzard in 2023, marking the largest deal in the company's history. At the time, MS aimed to strengthen the Xbox game lineup and increase subscribers to its subscription-based gaming service, Game Pass. However, a slowdown in console demand, stagnation in Game Pass growth, and rising development costs have prevented MS from achieving the expected results.

Xbox will also reorganize its affiliated game studios. According to Bloomberg, Xbox plans to sell Ninja Theory, the developer of 'Hellblade', and Undead Labs, known for 'State of Decay', while spinning off Double Fine, the developer of 'Psychonauts', and Compulsion Games, the developer of 'South of Midnight', as independent companies led by their founders.

The company is also considering selling or spinning off Arkane Studio in Lyon, France. All of these studios were acquired during the tenure of former Xbox CEO Phil Spencer. Going forward, Xbox plans to focus investment on blockbuster titles like 'Minecraft' and transition to a more centralized studio management system.

One of the reasons behind this restructuring is the overall deterioration of the gaming industry environment. According to FT, Xbox stated that the gaming industry is facing "the most severe hardware crisis in its history." The surge in console demand during the COVID-19 period has slowed down, while the spread of online gaming, rising development costs, and increased component prices are putting greater pressure on the industry. Additionally, growing demand for AI is driving up the prices of semiconductors and memory, further increasing the manufacturing costs of gaming hardware.

MS emphasized that these layoffs are not a direct result of AI replacing human roles. However, the company noted in its employee memo that "AI is changing the way work is performed." MS is investing heavily in data centers and cloud infrastructure to power its AI services, and as a result, cost controls are being tightened in less profitable divisions.

Meanwhile, there are conflicting reports from foreign media regarding the total number of layoffs at MS. FT reports that MS will lay off about 4,800 employees, representing roughly 2% of its workforce, with 3,200 from the Xbox division and the rest from the commercial division.

In contrast, Bloomberg reports that, in addition to the 3,200 layoffs at Xbox, another 3,200 employees—mainly from the sales organization and other departments—will be laid off, bringing the total number of layoffs to 6,400.

This content was produced with the assistance of AI translation services.