Microsoft will eliminate 4,800 positions, roughly 2% of its $2.9tn workforce, as it restructures the Xbox division. About 3,200 of those cuts fall on Xbox, with 1,600 immediate layoffs and another 1,600 spread over the next year; the remainder come from the commercial segment.

Xbox chief Asha Sharma told staff the business "is not healthy," citing margins 3‑10× lower than peer platforms and a hardware crisis driven by weak console demand, rising component costs, and the shift to online gaming. She described a "reset" that includes shedding four studios and trimming teams at Activision, Blizzard and Mojang, noting the unit lost 64 cents for every dollar invested in studios.

The move follows the $75bn Activision Blizzard purchase three years ago, intended to fuel Game Pass growth. Since January, Microsoft shares have dropped about 20% as investors question whether heavy AI spending and studio investments will deliver returns. Former CEO Phil Spencer had bet on studio acquisitions to drive subscriptions, but Sharma said those assets "did not grow at the pace we expected."

The cuts signal a strategic pivot from studio‑heavy expansion toward a leaner subscription model, yet the massive Activision outlay continues to pressure margins and keeps the stock under scrutiny.