Microsoft cuts 4,800 jobs, as Xbox unit downsizes and plans to spin off four gaming studios

July 7, 2026 - 01:01

Microsoft announced a significant workforce reduction on Thursday, cutting approximately 4,800 jobs across its commercial operations and its Xbox gaming unit. The layoffs, which represent roughly 4 percent of the company's total workforce, come as the tech giant continues to restructure its business to focus on cloud services and enterprise software.

The cuts hit the Xbox division particularly hard, where revenue has been declining amid a broader slowdown in the gaming market. Microsoft also confirmed it will spin off four of its internal game development studios, though the company did not name the studios or specify the terms of the separation. The move signals a shift away from in-house content creation as Microsoft leans harder on its Game Pass subscription service and third-party partnerships.

In an internal memo, Microsoft leadership described the layoffs as part of a "realignment" to better match resources with long-term growth areas. Affected employees in the commercial side include roles in sales, marketing, and customer support. The company said it will offer severance packages and career transition support to those let go.

The news follows a pattern of belt-tightening across the tech sector, where many firms have trimmed headcount after years of aggressive hiring. For Microsoft, the cuts are the deepest since 2014, when the company shed 18,000 jobs following its acquisition of Nokia's phone business. Analysts expect the restructuring to save Microsoft roughly $500 million annually, though the short-term cost of severance and studio spin-offs will offset some of that gain.