Xbox is handing the pink slip to 3,200 of its employees, or 20 per cent of the total workforce, over the next year. The move comes as part of the Microsoft-owned company’s broader AI-led layoffs, with Xbox being affected the most as its “business is not healthy”, Chief Executive Officer Asha Sharma said in a letter to employees.
In her email to workers, Sharma noted that 1,600 employees will be laid off on Monday, while the remaining ones will be let go over FY27. In addition, Xbox will divest four of its gaming studios and is preparing to part ways with another.
“Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses,” Sharma said in her email, which she posted on X, while noting that the layoff decision does not reflect the “talent and dedication” of employees.
This is an important email I sent today to all employees at XBOX:
Team,
We are beginning the most significant restructure in XBOX history. After careful consideration, I’ve made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…
— ASHA (@asha_shar) July 6, 2026
The Xbox layoffs come as part of parent Microsoft’s AI-led job cuts, with a total of 4,800 employees being let go as the tech giant joins its peers to invest more in artificial intelligence.
The Xbox CEO acknowledged that the gaming industry has been facing the most “severe hardware crisis” and said, “We must reset XBOX.”
Streamlined Operations
Sharma laid out three ways that Xbox will reset itself – overhauling its content portfolio, platform and how the team operates.
“History is full of companies that mistake longevity for inevitability. We will not be one of them,” she said, as she laid out the plan over the next few years.
The company, she said, has been losing 64 cents for every dollar it invested in a year. It now plans to “help independent creators succeed by providing open development tools and audiences.”
“Mojang and King will now report directly to me. These two studios have increasingly become platforms and are our largest by monthly active players. They bring critical geographic, demographic, and differentiation to XBOX,” Sharma said.
The CEO noted that in some parts of the company, there are as many as 14 layers of management, and this complexity has slowed decisions.
“We will reduce management layers to no more than 5, and where possible, 3. We will deliver success through a flatter organisation,” Sharma said, adding that the company will streamline how it accesses its tools.
Xbox will also reduce its vendor spend by 50 per cent, in an attempt to get back on its feet.
Chief Operating Officer Role Announced
Sharma further announced the promotion of veteran Helen Chiang to the role of Chief Operating Officer of Xbox, who will report directly to her.
“For the first time, we are establishing a Chief Operating Officer with end-to-end P&L responsibility across content, hardware, platform, and services,” Sharma said.
“She will bring our businesses together under one operating model, making sure we make clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results,” she added.
Sharma assured that the changes will make Xbox a “bigger company” over the next decade.
“This year, we’ll invest as much in XBOX as we ever have, but we’ll invest with greater focus, greater discipline, and greater clarity, all in service of making XBOX where the world plays and creates.” she said.
