Xbox CEO says 3,200 more jobs to be cut in FY27

Microsoft is undertaking one of the biggest transformations in Xbox’s history, announcing plans to eliminate approximately 3,200 gaming division jobs during fiscal year 2027 as the company reshapes its gaming business for long-term sustainability. The sweeping overhaul comes amid slowing console sales, rising game development costs, and increasing pressure to compete in an industry rapidly evolving around artificial intelligence and subscription-based gaming.

In an internal message to employees, Xbox CEO Asha Sharma described the restructuring as the most significant organizational reset since Xbox was launched, confirming that around 1,600 employees will be affected immediately, with additional workforce reductions continuing throughout the year.

Sharma emphasized that the decision was driven by business realities rather than employee performance, acknowledging the creativity and dedication of teams across the gaming division. She said Xbox currently operates with significantly lower profit margins than competing gaming platforms, making structural changes unavoidable.

Alongside the workforce reductions, Microsoft will reorganize several of its game studios. Compulsion Games and Double Fine Productions will return to operating as independent studios while retaining ownership of their creative projects. Meanwhile, Ninja Theory and Undead Labs are expected to transition to new ownership while continuing development of major titles already in production.

The company also confirmed that Arkane Studios France is evaluating strategic alternatives under French labor regulations, although Microsoft stressed that no previously announced first-party Xbox games have been canceled as part of the restructuring.

A major leadership change accompanies the overhaul. Former Mojang chief Helen Chiang has been promoted to Chief Operating Officer of Xbox, where she will oversee financial performance across the company’s gaming content, hardware, cloud services, and platform operations.

Microsoft also plans to simplify its corporate structure by reducing management layers, aiming to improve decision-making speed and operational efficiency. According to Sharma, Xbox’s organizational size has expanded considerably over recent years despite slower player growth, creating unnecessary complexity across the business.

The restructuring reflects broader challenges facing the global video game industry, where publishers are balancing soaring production costs, shifting consumer habits, cloud gaming expansion, and the growing role of AI-powered game development tools. Analysts believe the changes position Microsoft to focus more heavily on Game Pass, cross-platform publishing, and next-generation gaming technologies while strengthening Xbox’s long-term financial performance.