Microsoft (MS) is undertaking a major restructuring, cutting 4,800 jobs globally, which represents 2.1% of its workforce. The layoffs are primarily concentrated in the gaming division, including Xbox.
On July 6, local time, MS announced the job cuts along with plans to reorganize its Xbox business.
Within the Xbox division, 3,200 employees are affected, with 1,600 receiving termination notices on the same day.
MS will also streamline some of its game studios. Compulsion Games and Double Fine Productions will be separated into independent studios, while Ninja Theory and Undead Labs will undergo sale processes. Arkane Studios is in discussions with French labor unions regarding its future.
This restructuring is seen as a response to MS's inability to achieve expected profitability despite significant investments in its gaming business. The company expanded its Xbox ecosystem by acquiring Activision Blizzard in 2023 but has struggled to close the gap with competitors Sony PlayStation and Nintendo.
Asha Sharma, head of Xbox, informed employees in a notice that “our business is not healthy right now,” citing lower profit margins compared to competitors as a reason for the restructuring. MS plans to simplify its organization by creating a new Chief Operating Officer (COO) position and reducing its reporting structure from up to 14 levels to 3 to 5 levels.
The layoffs are also linked to MS's increased investment in artificial intelligence (AI). The company is pouring substantial funds into AI infrastructure and data centers, leading the market to interpret the job cuts as a measure for cost reduction and profitability defense.
However, MS clarified that AI is not directly replacing jobs. Amy Coleman, Chief Human Resources Officer, stated, “The positions eliminated today are not being replaced by AI,” while acknowledging that “AI is certainly changing the way we work.”
* This article has been translated by AI.
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