Technology giant Microsoft said on Monday that it would be cutting 4,800 jobs, reducing its global workforce by 2.1 per cent. The decision is a part of company's restructuring phase and Xbox will see the majority of job cuts, as Microsoft begins its new fiscal year.
The company has announced that 3,200 jobs would be cut in Xbox over the coming fiscal year, with Microsoft sending around tens of billions of dollars to stay in the artificial intelligence (AI) race. It has said that its business is changing "because the world around it is changing".
"Companies don't get to choose whether their industry changes; they only get to choose whether they change with it," Microsoft Executive Vice President Amy Coleman said in a memo to all the employees, while acknowledging that the roles that will be eliminated were "not being replaced by AI".
The layoffs came after Microsoft offered voluntary buyouts to around 8,750 employees in May, with more than 30 per cent of eligible workers accepting the offers, Coleman added.
Xbox bears the brunt of layoffs
Around 3,200 employees of Xbox will be laid off, which is 20 per cent of its global workforce. Xbox is the most affected by Microsoft's decision because its "business is not healthy", Chief Executive Officer (CEO) Asha Sharma has said.
In her letter to employees that she posted on X, Sharma said the decision is painful and it will directly affect people who have "poured their creativity into building Xbox". However, this does not reflect their "talent or dedication", she said.
"We are operating at margins that are 3–10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure," Sharma said. "To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content. While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome."
"I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal. XBOX has many of the most beloved franchises in entertainment history, talented studios around the world, and we will return to growth in 2027," she added.
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