Microsoft announced Monday that it plans to eliminate 3,200 jobs across its underperforming Xbox gaming division.
The tech company said 1,600 roles will be cut immediately, with additional reductions tied to the departure of four game development studios from the Xbox organization.
“Our business today is not healthy,” Xbox CEO Asha Sharma, who took over the gaming division earlier this year, said in a memo to Xbox workers released by Microsoft. “We are operating at margins that are 3-10x lower than comparable platform and publishing businesses.”
Sharma also conceded that Microsoft’s spending on Game Pass, its gaming subscription platform, and broader multi-platform services has not delivered growth as quickly as the company had anticipated.
“As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset Xbox,” she said.
Sharma said another 1,600 job cuts are expected during the fiscal year that began last week.
The latest Xbox reductions come as Microsoft moves more broadly to rein in labor expenses. In a Monday blog post, Microsoft Chief People Officer Amy Coleman said the company is cutting 4,800 jobs in total, representing just over 2% of its workforce.
The job cuts come after Microsoft began offering voluntary buyouts in May to roughly 8,750 employees. Coleman said more than 30% of those eligible accepted the voluntary retirement packages.
“I also want to be direct that the roles eliminated today are not being replaced by AI,” she wrote.
Microsoft announced in June that it would raise the prices of its Xbox consoles starting August 1, citing rising costs of storage and memory components in electronic devices.
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The price of consoles with 512 GB of storage will increase by $100 to nearly $500, while those with 1 TB of storage will increase by $150.
Megan Cerullo
contributed to this report.
