Xbox Layoffs: Employees Nervous and Scared Due to Delayed Job Cuts, Says Report
Microsoft is cutting 3,200 Xbox jobs, with 1,600 layoffs occurring this week and the remainder planned over the next year. This phased approach has left employees feeling anxious and uncertain, as leadership works to address low profit margins and flatten the division’s management structure through a significant organisational reset.
Microsoft has initiated the most significant restructuring in the history of its Xbox division, confirming plans to reduce its workforce by 3,200 positions throughout the 2027 fiscal year. The company executed the first phase of this reduction this week, terminating 1,600 roles, while the remaining 1,600 positions are slated for elimination over the next 12 months.
The staggered nature of these cuts has created a pervasive climate of uncertainty within the organisation. As per a report by Bloomberg, the decision to space out the layoffs has left remaining staff on tenterhooks. Employees are now grappling with the psychological toll of not knowing who among them will be impacted by the second wave of job losses, effectively turning their daily work environment into a state of prolonged anxiety. Xbox Layoffs: Are Asha Sharma's H-1B Visa Policies Replacing US Workers? Xbox CEO Faces Backlash Over Job Cut Decision.
Xbox Layoffs: Asha Sharma Says Business 'Not Healthy'
The restructuring follows a period of stark financial underperformance for the gaming division. In a message to staff, Xbox CEO Asha Sharma candidly admitted, "Our business today is not healthy," noting that the division has been operating at profit margins significantly lower than those of its peers. The company has reportedly lost an average of 64 cents for every dollar invested in recent cycles, prompting the need for a drastic "reset."
To streamline operations, Microsoft is moving toward a flatter organisational structure. The current hierarchy, which in some instances features up to 14 layers of management, will be reduced to no more than five. Furthermore, the company is divesting four of its internal studios, including Double Fine Productions and Compulsion Games, to new management, while it continues to evaluate the future of others.
The ongoing restructuring has drawn criticism for its lack of immediate finality. While leadership maintains that the phased approach is necessary to navigate regulatory requirements and logistical complexities, staff members have described the atmosphere as "cruel." The ambiguity surrounding which departments will face cuts next has hindered morale, with many employees expressing concerns that the focus has shifted from game development to mere survival. Xbox Layoffs: CEO Asha Sharma Shares Email Sent to Employees, Confirms Job Cuts and Studio Reset.
Despite these reductions, Microsoft has reiterated that it remains committed to its first-party projects and is not cancelling any previously announced games. The leadership team maintains that these changes are intended to provide the division with greater focus and discipline, aiming to steer Xbox toward a more sustainable growth model by the end of the 2027 fiscal year.
(The above story first appeared on LatestLY on Jul 11, 2026 07:34 AM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).
