Microsoft to cut around 4,800 jobs and invest billions in artificial intelligence

Justification from management

Coleman also emphasized: "Die Bedürfnisse unserer Kund:innen verschieben sich, die Geschäftsmodelle, mit denen wir sie bedienen, verschieben sich, und das bedeutet, dass sich auch die Arbeit selbst umwandeln muss." Microsoft is, according to its own statements, supporting the move with an investment of 2.5 billion dollars.

The layoffs at Xbox are connected to the recently established "Frontier Company" business unit by Microsoft. Asha Sharma, who took on the role of CEO of Xbox this year, plans to cut a total of around 3,200 positions in this area by fiscal year 2027. Sharma wrote in an email to the workforce: "Unser Geschäft ist derzeit nicht in guter Verfassung. Wir arbeiten mit Margen, die drei- bis zehnmal niedriger sind als bei vergleichbaren Plattform- und Verlagsunternehmen."

As part of the restructuring, Microsoft announced that it would place four of its game studios under new leadership. Sharma described the move as "die bedeutendste Umstrukturierung in der Geschichte von Xbox" and stated: "Wir müssen Xbox neu aufstellen." The layoffs at Xbox come against the backdrop of a shrinking gaming industry in the face of new opportunities in the field of generative AI.

Xbox at the center of the restructuring

Companies developing so-called "world models," including Google DeepMind, World Labs, General Intuition, Luma AI, and Runway, received massive funding over the past year. This competition in the area of AI-supported content and worlds evidently places additional adjustment pressure on Microsoft.

Back in April, Microsoft had offered severance packages in the form of voluntary departures to an unspecified number of employees – some estimates put the figure at around 5,500. Last year, the company had laid off approximately 15,000 employees in two rounds. The job cuts now announced continue this trend.

Background: repeated waves of layoffs

The high investment sum of 2.5 billion dollars alongside the job cuts underscores the company's strategic shift: away from classic workforce expansion, toward massive investments in AI infrastructure and automated processes. Microsoft is following a pattern that can be observed across the entire tech industry.

The memos to the workforce and public reports paint the picture of a company in transition: while thousands of jobs are being eliminated on the one hand, new competencies and business areas around artificial intelligence are to be expanded on the other. Coleman summed it up as follows: "Arbeit muss sich umwandeln."

Outlook for the coming months

For those affected, the announcement means, in the short term, above all uncertainty. Microsoft has not yet published further details regarding the exact terms of the severance packages and transition programs. The company also left open which Xbox studios are specifically affected by the organizational changes.