Microsoft lays off nearly 5,000 employees across Xbox, commercial sales

Microsoft cut around 4,800 roles, or 2.1% of its global workforce, on Monday — the latest in a series of layoffs that’s stoking fears that AI will replace people at companies.

The layoffs will hit Xbox and commercial sales the hardest, with Xbox losing 1,600 staffers today, according to memos shared with Microsoft’s staff.

Here’s a snippet from a memo from Amy Coleman, EVP and chief people officer:

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. Our customers’ needs are shifting, the business models that serve them are shifting, and that means the work itself — what we do, where we focus, and how we’re organized — has to transform too.

Companies don’t get to choose whether their industry changes; they only get to choose whether they change with it. That means we will need to adjust resources and roles and shift how we operate so we can have the greatest impact for our customers.

Coleman stressed that the roles being eliminated today “are not being replaced by AI,” but noted, “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 evolves,” Coleman wrote.

To many feeling the sting of unemployment, that’s a distinction without a difference.

The layoffs build on Microsoft’s recent launch of its Frontier Company business unit , which is focused on delivering enterprise AI deployments with the firm’s existing AI tools and an army of forward deployed engineers. That move is backed by a $2.5 billion investment, mirroring a common theme we’re seeing among layoffs this year — job cuts are correlating with increased AI spending.

Speaking about the Xbox layoffs, Coleman said little: “We are restructuring to position the business for long-term success. Engineering teams across the company will also evolve their structure and priorities to meet customer needs and innovate for the future.”

Of today’s 4,800 layoffs at Microsoft, 1,600 will hit Xbox, with about 3,200 cuts in total expected through fiscal year 2027, according to Asha Sharma , CEO of Xbox. In an email she sent to employees on Monday, Sharma called this “the most significant restructure in Xbox history.”

“Our business today is not healthy,” Sharma wrote. “We are operating at margins that are 3–10x lower than comparable platform and publishing businesses.” She added that Xbox made bets like its monthly subscription service Game Pass, alongside moves to grow its portfolio of content and invest in multiplatform, among other attempts to breathe life into the business. None of those strategies grew at the expected pace, leading to the core business weakening even as Xbox added more teams and investment.