Microsoft announced a major restructuring of its gaming division, including significant layoffs and studio closures, citing economic challenges in the video game industry. The company stated it will lay off 1,600 Xbox employees immediately, with another 1,250 roles eliminated over the next year. Xbox Chief Executive Asha Sharma acknowledged the company had misread the market and that its business is “not healthy.” Microsoft stock fell more than 1% on the news, trading at $384 at press time.
Microsoft has announced major changes to its gaming division, including significant layoffs and a shift in focus. The company will lay off thousands of employees in its Xbox workforce, roughly 20%, and close several game studios.
In a statement, executives acknowledged misreading the economic challenges facing the video game industry. “Our platform teams are 40 percent larger than they were at the start of this generation, even as our player base and playtime have declined,” Xbox Chief Executive Asha Sharma wrote.
Sharma detailed the restructuring in a letter to employees, stating “We are beginning the most significant restructure in XBOX history.” The plan includes reducing the team by approximately 3,200 employees throughout the 2027 fiscal year.
The video game industry is facing an unprecedented memory and storage crisis, affecting all major players. Microsoft, alongside Sony and Nintendo, has raised console prices to contend with rising component costs.
Sharma was brought in last year to revitalize Xbox but found the task difficult. “Our business today is not healthy,” she added in an email to employees linked on the company’s news site.
“We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. We must reset XBOX,” she stated. At press time, MSFT stock is trading at $384, down over 20% year-to-date.
