Microsoft cuts 4,800 jobs, as Xbox unit downsizes and plans to spin off four gaming studios
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- Microsoft is eliminating 4,800 jobs effective Monday — 2.1% of its workforce — with the stock already down 19% on the year, the worst showing among megacap tech names in 2026.
- Xbox will lose 3,200 employees, roughly 20% of the unit — 1,600 today and the remaining 1,600 through fiscal 2027, per Xbox CEO Asha Sharma.
- Microsoft is spinning off four gaming studios — Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Labs — while France-based Arkane Studios (acquired via the $8.1 billion ZeniMax Media deal in 2021) explores strategic options through its works council.
- Microsoft's chief people officer Amy Coleman, a 27-year veteran, said AI is "changing how work gets done" but explicitly stated AI is not replacing the laid-off workers.
- DA Davidson analyst Gil Luria told CNBC Xbox "is not a business Microsoft needs to be in" and called a full Xbox spin-off "very possible" — a public call to divest the gaming unit entirely.
- More than one-third of eligible employees accepted Microsoft's first-ever voluntary retirement program, launched in April and targeting U.S. workers at the senior director level and below.
Why it matters: Xbox is absorbing two-thirds of the 4,800 cuts while four of its studios go independent — moves that look like a staged unwind of Microsoft's gaming ambitions. With the stock the worst 2026 performer in the megacap group at -19% YTD and a Wall Street analyst now publicly arguing on CNBC that Xbox "is not a business Microsoft needs to be in," a full Xbox divestiture is no longer fringe speculation.
