Microsoft has announced a new round of layoffs that will primarily affect the Xbox division and the company's sales department.

Xbox head Asha Sharma announced that the division cut 1600 employees on July 6, 2026, and that an equal number would be laid off during the 2027 fiscal year—totaling about 20% of the team. According to Sharma, Xbox’s profitability is 3 to 10 times lower than that of its competitors, and the gaming division needs a "reset."

At the same time, Microsoft is cutting 3200 jobs—primarily in sales departments. Chief People Officer Amy Coleman stated that this move is due to a "change in approach to product creation." In total, the company plans to lay off approximately 6400 employees worldwide, representing less than 3% of its total workforce of 228 thousand.

Bloomberg notes that the layoffs are driven in part by Microsoft's desire to cut costs in unprofitable areas amidst rising expenses for the data centers required to run AI models.

Within the framework of what the company has termed the "most extensive restructuring" of Xbox, the division will sell the game studios Ninja Theory and Undead Labs to as-yet-unnamed buyers. Both studios will continue working on their current projects—Senua and State of Decay 3—in collaboration with Xbox.

Two more studios, Double Fine and Compulsion Games, will once again come under the management of their founders; they will receive funding for the transition period as well as intellectual property rights. Negotiations regarding a potential sale will begin with a fifth studio, Arkane.

Earlier, in early July 2026, Business Insider reported, citing a source, that Microsoft planned to cut about 2,5% of its workforce.

This is not the company's first major restructuring: in 2025, Microsoft had already carried out two waves of layoffs—cutting about 7000 jobs in May and another 9000 in July. At the time, the company attributed the decision to a desire to reduce the number of "management layers" between rank-and-file employees and top executives.