--- title: "Microsoft cuts about 4,800 jobs and overhauls its Xbox gaming unit" description: "Microsoft is cutting roughly 4,800 jobs, about 2 percent of its workforce, with its Xbox video game division taking the heaviest hit and several game studios set to be spun off or sold. The company is trimming staff even as it pours enormous sums into artificial intelligence." category: "Business" category_url: https://herald.la/category/business author: "Omar Haddad" published: 2026-07-06T13:52:00.000Z updated: 2026-07-06T13:52:00.000Z canonical: https://herald.la/article/microsoft-cuts-about-4800-jobs-and-overhauls-its-xbox-gaming-unit tags: ["microsoft", "layoffs", "xbox", "gaming", "artificial-intelligence"] --- # Microsoft cuts about 4,800 jobs and overhauls its Xbox gaming unit Microsoft is cutting roughly 4,800 jobs, about 2 percent of its workforce, with its Xbox video game division taking the heaviest hit and several game studios set to be spun off or sold. The company is trimming staff even as it pours enormous sums into artificial intelligence. Microsoft is shedding thousands more jobs, in a round of cuts that falls hardest on its gaming business and underlines how aggressively the company is reshaping itself around artificial intelligence. ## The scale of the cuts The software giant is eliminating about 4,800 positions, roughly 2 percent of its global workforce, [CNBC reported](https://www.cnbc.com/2026/07/06/microsoft-cuts-2point1percent-of-employees-as-xbox-unit-plans-to-spin-studios.html). It is the latest in a series of reductions at the company, which cut thousands of jobs in separate rounds during 2025, [The Next Web reported](https://thenextweb.com/news/microsoft-layoffs-under-2-5-percent-2026). The Xbox gaming unit is bearing much of the pain, with a large share of the cuts concentrated there, [according to Kotaku](https://kotaku.com/xbox-spins-off-compulsion-games-double-fine-productions-undead-labs-and-ninja-theory-while-blade-maker-arkane-reviews-potential-strategic-options-2000712845). Microsoft's leadership has described the changes as one of the most significant restructurings in Xbox's history. ## Studios cut loose As part of the overhaul, Microsoft is parting ways with several game studios it had brought in-house. Double Fine Productions and Compulsion Games are being returned to independence, keeping the rights to their games, while Ninja Theory and Undead Labs are being handed to new owners who have committed to finishing games those studios were developing, [Kotaku reported](https://kotaku.com/xbox-spins-off-compulsion-games-double-fine-productions-undead-labs-and-ninja-theory-while-blade-maker-arkane-reviews-potential-strategic-options-2000712845). Another studio, Arkane Lyon, is reviewing its options, language that often signals a possible sale or closure. The moves partly unwind the buildup that followed Microsoft's roughly $69 billion acquisition of Activision Blizzard, as the company narrows a sprawling collection of studios. ## The AI trade-off The backdrop to the cuts is a spending spree of a different kind. Microsoft is on track to spend on the order of $190 billion on capital projects this year, a sharp jump driven largely by the data centers and chips needed to build AI, [Fortune reported](https://fortune.com/2026/07/01/microsoft-may-cut-thousands-more-jobs-control-costs/). Trimming payroll while ramping up AI investment has become a defining pattern for the company under Chief Executive Satya Nadella, who has acknowledged the human toll of the layoffs even as he presses the shift. ## A wider tech reckoning Microsoft is not alone. Across the technology industry, big companies have cut staff through 2025 and 2026 while redirecting money toward AI, betting that automation and new products will justify the disruption. The open question, for Microsoft as much as its rivals, is whether those enormous AI investments will pay off quickly enough to vindicate the jobs being cut to help fund them. For the workers affected, including many in a gaming division that Microsoft spent years and tens of billions of dollars assembling, the strategy is little comfort. For the company, it is a calculated bet that the future is worth the cost.