Microsoft will lay off over 4800 employees, but it's not because of AI

07 Jul 2026, 04:48

Microsoft has announced a massive restructuring that includes laying off 4,800 employees, or about 2.1% of its global workforce. This major shakeup heavily impacts the commercial and Xbox sectors, with Xbox kicking off its biggest restructure ever by cutting 3,200 roles through FY27, reducing management layers, and spinning off four gaming studios, including Ninja Theory and Double Fine, to new ownership or independence.

AI didn't cause this layoff, though

According to Microsoft Chief People Officer Amy Coleman, the layoffs are a response to a fast-changing tech landscape. While these cutbacks are not due to AI replacing human workers, the company notes that automation is shifting how roles operate. The adjustments aim to realign resources toward the brand's highest priority projects.

The biggest changes are happening over at Team Xbox. Xbox head Asha revealed that the gaming division is facing low margins and an industry-wide hardware crisis. To fix this, Xbox is implementing a massive internal reset.

Here are the key changes coming to Xbox:

Studio Spin-offs: Compulsion Games and Double Fine Productions will return to being independent studios. Meanwhile, Ninja Theory and Undead Labs are moving to new ownership to continue working on Hellblade and State of Decay 3. Arkane France is also reviewing its strategic options.
Flatter Organisation: Xbox will slice down its management structure. Some departments currently have up to 14 layers of management, which will be reduced to just 3 to 5 layers to speed up decision-making.
New Leadership: Helen Chiang has been promoted to become Xbox’s first end-to-end Chief Operating Officer, managing everything across content, hardware, and services. Long-time veteran Dave McCarthy is also retiring after 17 years.

Despite the massive downscaling, Xbox claims that no publicly announced first-party games are being cancelled and that it intends to return to growth by 2027. Personally, we can understand why Microsoft is doing this. But, it would be upsetting to know if Malaysians are also affected by this layoff. What are your thoughts on the news? Feel free to leave your comments below. Stay tuned to TechNave for more tech updates.