Microsoft has announced plans to cut 4,800 jobs worldwide, representing just over 2% of its global workforce, as the company restructures its sales, consulting, and gaming businesses to focus on artificial intelligence (AI) and long-term profitability.
The layoffs include around 600 positions in Washington state, where Microsoft's headquarters is located. About 1,600 of the job cuts will come from the Xbox division, with total reductions in the gaming business expected to reach approximately 3,200 employees—around 20% of Xbox's global workforce—by the end of the fiscal year.
As part of the overhaul, Microsoft will also spin off four Xbox game studios into independent companies. Xbox CEO Asha Sharma described the move as the largest restructuring in the division's history, citing low profit margins and financial losses across several studios.
Microsoft President Brad Smith said the company must adapt to rapid changes driven by AI and evolving customer needs, emphasizing that a successful business is essential for maintaining long-term employment.
The company stressed that the layoffs are not a direct result of AI replacing workers. Instead, Chief People Officer Amy Coleman said Microsoft is shifting employees into more technical and customer-focused roles while investing in reskilling programs. She added that AI is changing how work is done, requiring employees to develop new skills as the workplace evolves.
The restructuring comes as Microsoft continues investing heavily in AI infrastructure and recently launched its $2.5 billion "Frontier Company" initiative, which will deploy thousands of engineers to help customers implement AI solutions.
Before the latest announcement, Microsoft employed about 220,000 people globally. The company expects its overall workforce to decline slightly this year despite ongoing hiring in strategic areas.
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