Microsoft Cuts 4,800 Jobs, Xbox Loses a Fifth of Its Staff

Microsoft announced on Monday that it is cutting 4,800 jobs, equivalent to 2.1 percent of the company's global workforce. The Xbox division took the biggest hit, with 1,600 immediate layoffs, and total cuts in gaming expected to reach around 3,200 positions over the course of fiscal year 2027.

The decision coincides with record company spending on artificial intelligence. In the fiscal year now ending, Microsoft will spend more than $100 billion on AI and cloud infrastructure, with roughly two-thirds going toward chips for training and running models. That's up from $88.7 billion a year earlier.

Xbox Under Cost Pressure

In an internal memo to the team, Xbox president Asha Sharma did not mince words, describing the state of the gaming business as poor. She pointed to hardware component costs rising faster than at any point in the industry's history, and to falling revenue, despite Microsoft having invested more than $20 billion over five years in content, platform, and hardware subsidies.

Our business today is not healthy. We're operating at margins that are 3-10 times lower than comparable platform and publishing businesses - Asha Sharma, Xbox president

Sharma also stressed that the gaming industry is going through the most severe hardware crisis in its history, further straining console margins. As part of the restructuring, the number of management layers within Xbox will drop from 14 to a maximum of five, eventually three, and four development studios are being reorganized. Compulsion Games and Double Fine are expected to regain independent company status.

Sales and Consulting Also Losing Jobs

The cuts are not limited to gaming. The commercial sales and consulting division was also hit by the reductions, though Microsoft did not provide exact figures there. The company maintains that some employees will be moved into new roles rather than let go - more than 4,000 people have been retrained this way over the past year.

AI Is Changing Work, Not Replacing It, Microsoft Says

Amy Coleman, Microsoft's executive vice president and chief people officer, denied that laid-off employees were being directly replaced by artificial intelligence. She stressed, however, that the way technology is built, deployed, and used is changing faster than at any other point in her career.

The way technology is built, deployed, and used is changing faster than at any other point in my time here - Amy Coleman, EVP and chief people officer, Microsoft

These assurances don't change the fact that the cuts arrive alongside the announcement of a new business unit, Frontier Company, backed by $2.5 billion and intended to embed 6,000 engineers and consultants directly with clients deploying AI systems. In other words, money and jobs are shifting away from traditional divisions and toward projects tied directly to artificial intelligence.

A Wave of Layoffs Across the Industry

Microsoft joins a string of major tech companies that in recent months have attributed workforce reductions to rising AI investment costs and the need to reorganize teams around new tools. For IT workers, it's a signal that even record-breaking financial results don't shield a division from cuts if its margins fall short of competitors.

For Poland's IT job market, these developments carry indirect but real weight - Microsoft is one of the country's largest employers and technology partners, and a global shift of budgets toward AI deployment typically translates, with some delay, into local staffing structures and project priorities among partners and integrators that rely on the company's technology.

Sources: TechCrunch (techcrunch.com), GeekWire (geekwire.com), Daily Caller (dailycaller.com)