Microsoft announced Monday that it is cutting 4,800 Xbox jobs amid an era in which the rise of artificial intelligence is transforming the tech industry.

Microsoft announced Monday that it is cutting 4,800 Xbox jobs amid an era in which the rise of artificial intelligence is transforming the tech industry.

The technology giant, which Bill Gates co-founded a half century ago, is cutting 2.1% of its workers mainly within the Xbox Gaming Division. Microsoft will immediately axe 1,600 workers as the company focuses on how to deliver during a “fast changing industry,” according to a Monday memo sent out by executive vice president Amy Coleman.

“The way technology is built, deployed, and used is transforming faster than at any point in my time here. Our customer’s needs are shifting, the business models that serve them are shifting, and that means the work itself- what we do, where we focus, and how we’re organized- has to transform too,” Coleman said in her statement to employees.

Microsoft did not immediately respond to the Daily Caller News Foundation’s request for comment.

Asha Sharma, the newly appointed CEO and executive vice president of Microsoft gaming, said that she “made the difficult decision to reduce our team by approximately 3,200 throughout FY27,” in a Monday statement to Xbox employees.

“This will include 1,600 role eliminations today, and in addition, four studios will leave Xbox to new management,” she added. “Our business today is not healthy. We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”

Four Xbox game development studios including Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab will be a part of the changes, according to the memo sent out by Sharma.

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While Microsoft is not replacing these jobs with AI it is instead coming to terms with the fact that the rapidly expanding technology is changing the way that businesses run. AI tools that automate routine business tasks have emerged as a threat to tech companies as memory chip prices have surged due to data center demand. This has forced Microsoft to raise Xbox prices at a time when the demand for the consoles was already low, according to NBC.

Microsoft plans on reducing management within Xbox from 14 layers of management to five as they “reset” Xbox.

“We know that great technology gets better when its simpler, not bigger,” Sharma said in the memo.

In 2025, Microsoft laid off around 9,000 people as the company spent over $80 billion investing in artificial intelligence and data centers to train AI models, according to BBC.

Amazon and has also laid off thousands of employees in workforce reductions as Artificial Intelligence is changing business models and investing into AI, CNBC reported.

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