Microsoft's Xbox Division Faces Fourth Round of Layoffs Amid AI Push and Console Strategy Shift

Xbox braces for heavy layoffs as Microsoft signals new hybrid console

As an Amazon Associate, we earn from qualifying purchases. TweakTown may also earn commissions from other affiliate partners at no extra cost to you. Microsoft is planning a significant round of layoffs in the Xbox games division, sources tell Bloomberg's Jason Schreier. New layoffs are set to happen at Xbox. New reports indicate that Microsoft will conduct another large layoff in the Xbox games unit next week as part of a company-wide restructuring. These layoffs will be on top of the 6,000 job eliminations that Microsoft made last month. Today's news marks the fourth round of layoffs at Xbox in the last 18 months. To stem costs and help equalize margins, Xbox management has laid off thousands of workers over the last year and a half across all of its operating groups (Activision Blizzard King, ZeniMax Media, and Xbox Game Studios). It's unknown whether or not this reorganization could affect how Microsoft recognizes and classifies gaming as a business; currently, Xbox is part of Microsoft's More Personal Computing segment. The layoffs come at a time when Microsoft is shifting to a more streamlined and profit-first approach, at least with Xbox. For example, Microsoft looks to be unifying Windows and Xbox together for the next Xbox console, which could end up being a PC that runs Xbox games. It's said this new console may not be made by Microsoft and could be made by third-party OEMs like ASUS. Microsoft is already taking this hands-off approach with the Xbox Ally X, which is a specialized ROG Ally with a custom button and UI improvements. The idea behind making Xbox consoles into PCs, theoretically, would be to eliminate the need to manufacture unprofitable hardware. These details remain unconfirmed. The news also arrives as Microsoft is starting utilize AI more, even in its games business. In 2023, Microsoft injected $10 billion into OpenAI to help accelerate AI adoption into its products and services. Microsoft recently revealed a new generative AI gaming solution called Muse that can create and simulate gameplay in real-time, effectively alleviating the need for a games engine. There are also plans to utilize generative AI solutions for video games development. Microsoft signed a multi-year deal with Inworld to use gen AI for game stories, quests, and dialog sequences. The idea is to remove some of the busy work from making games, but the focus of the Inworld partnership feels decidedly creative. While Microsoft as a whole is doubling-down on AI, Xbox leadership always gives its first-party game studios a choice on whether or not to utilize AI while making their games.

Game over for Xbox jobs? Microsoft hits layoff button again, as staff braces for fourth layoff in 18 months

Microsoft Xbox Division Layoffs: Microsoft is preparing for another major round of layoffs in its Xbox gaming and sales divisions, marking the fourth such cut in just 18 months. This move comes amid continued pressure to increase profits after the $69 billion Activision Blizzard acquisition. The restructuring coincides with Microsoft's fiscal year-end and reflects a wider trend across the tech sector. As AI investment soars, companies like Microsoft, Google, IBM, and Amazon are reshaping their workforce to align with shifting priorities and economic uncertainty.Microsoft will begin another wave of major job cuts next week, with its Xbox division and global sales teams expected to bear the brunt. According to Bloomberg, the cuts will affect thousands of workers and are part of a broader corporate reorganisation that aligns with Microsoft's fiscal year-end on 30 June. This will be the fourth significant layoff at Xbox in just 18 months. Inside the company, managers are already bracing for what they call a "substantial" round of reductions. Xbox, once a growth engine, is now under scrutiny. Ever since Microsoft completed its $69 billion acquisition of Activision Blizzard in 2023, expectations have shifted dramatically. The pressure to deliver profits has increased. Previous cost-cutting has already been sweeping. In January 2024, the company laid off 1,900 staff in the gaming division. Another 650 were let go in September. Several studios were closed -- Tango Gameworks, best known for Hi-Fi Rush, and Arkane Austin, the team behind Redfall. The latest cuts come not just to reduce expenses but to prepare Xbox for its next-generation console. The Verge reported that Microsoft is "restructuring Xbox distribution across central Europe," with some operations shutting down completely. Microsoft's sales and marketing team, one of its largest divisions with around 45,000 staff, will see some of the heaviest reductions. This move comes after the company already slashed 6,000 jobs in May and another 300 soon after. These layoffs are part of a strategy to flatten the company's management structure and cut administrative overhead. Microsoft previously confirmed that it plans to eliminate around 3% of its global workforce of 228,000 employees this year. Microsoft has not officially commented on the layoffs. Microsoft's internal shift is not happening in a vacuum. Behind the scenes, the company is making enormous investments in artificial intelligence. It plans to spend up to $80 billion on data centres and AI infrastructure this fiscal year alone. This means tough decisions elsewhere. The company is prioritising engineering and technical roles over administrative and legacy ones. As reported earlier, the job cuts aim to "place greater emphasis on engineering capabilities over administrative roles." Microsoft isn't alone in slashing headcount. Across the tech industry, over 61,000 professionals have been laid off in 2025, according to Layoffs.fyi. The reasons are familiar -- sluggish revenue growth, inflationary pressures, and the disruptive rise of AI. At Google, hundreds of staff have been let go from Android, Pixel, and Chrome teams. This followed a merger between its Platforms and Devices units last year. In January, Google launched a voluntary exit programme that offered senior staff 14 weeks of severance pay, plus an additional week for every year served. Amazon has also made cuts, trimming around 100 roles from its Devices and Services team, which manages products like Alexa and Kindle. IBM is also pushing hard into automation. CEO Arvind Krishna recently told the media the company has embraced AI to streamline tasks and improve efficiency. He confirmed that IBM had removed around 8,000 roles -- many from its Human Resources department -- after introducing AI tools to handle those responsibilities. In Krishna's words: "Even with these technological advancements, IBM's overall headcount has increased," highlighting how automation savings are being redirected into departments like marketing and software development. While the scale of Microsoft Xbox division layoffs is striking, it reflects a broader industry reckoning. The tech world is entering a period where profits matter more than headcount. Innovation is no longer about how many people are building something -- but how quickly and efficiently they can do it using the latest tools, especially AI. For those working in gaming or tech sales, the terrain is shifting fast. And it's unlikely to stop here.

Xbox Braces For Fourth Major Layoff Round In 18 Months As Microsoft Pivots To AI - Microsoft (NASDAQ:MSFT)

Microsoft Corp. MSFT is reportedly preparing for significant layoffs within its Xbox division, with cuts expected to be announced as early as next week. Bloomberg reported on Tuesday, citing unnamed sources, that this move represents the Xbox division's fourth major round of layoffs in the past 18 months. Xbox has struggled to boost profit margins since the Activision Blizzard acquisition. Also Read: Microsoft Fires Hundreds More Workers Amid AI-Fueled Growth, Calls It Positioning The Company For 'Success' This round of layoffs at Xbox aligns with a larger trend across Microsoft. Recent reports indicated Microsoft's plans to cut thousands of jobs, primarily in its sales division, as the company streamlines operations and reallocates resources. Adding to the economic pressures, a report in May 2025 indicated Microsoft's plans to raise Xbox console prices globally. This strategic pricing adjustment, with U.S. models increasing by up to 27%, was explicitly aimed at mitigating the impact of the Trump administration's tariffs on goods manufactured in countries like China, where Xbox consoles are primarily produced. This move followed similar price hikes from direct competitors Sony Corp. SONY for its PlayStation 5 consoles and production delays from Nintendo Co. NTDOY for its upcoming Switch 2, indicating a broader industry response to increased manufacturing and supply chain costs. Microsoft and other Big Tech giants, including Amazon.Com AMZN and Meta Platforms META, have been downsizing in thousands while ramping up their artificial intelligence bases. Microsoft laid off 6,000 employees in May. As of June 2024, the company had 228,000 full-time employees, of which 55% were based in the U.S. Further demonstrating its restructuring efforts, Microsoft ended its China joint venture Wicresoft in April 2025, resulting in the elimination of 2,000 jobs. The company has been consistently downsizing by thousands throughout 2024, indicating a sustained effort to optimize its operational footprint. Looking back, Microsoft had also laid off 10,000 employees in early 2023, representing 4%-5% of its workforce at the time, citing a pandemic-induced slowdown in growth and a need to adjust to a new economic reality. Despite these widespread layoffs in other areas, Microsoft remains heavily committed to AI. A March 2025 report indicated that while Microsoft shelved new data center projects in the U.S. and Europe, potentially amounting to 2 gigawatts of electricity, it remained firmly on track to spend about $80 billion building AI data centers this fiscal year. This significant investment underscores AI as a core strategic priority for Microsoft's future growth and competitive edge. MSFT Price Action: MSFT stock was trading higher by 0.58% to $488.94 at last check Tuesday. Read Next: Rising AI, Analytics Budgets Could Lift Microsoft, Snowflake, Datadog Image via Shutterstock MSFTMicrosoft Corp$491.221.07%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum67.19Growth51.34Quality34.44Value13.49Price TrendShortMediumLongOverviewAMZNAmazon.com Inc$213.402.36%METAMeta Platforms Inc$709.931.63%NTDOYNintendo Co Ltd$22.161.89%SONYSony Group Corp$24.932.07%Market News and Data brought to you by Benzinga APIs