Microsoft announced sweeping layoffs across its Xbox division, eliminating 1,600 positions immediately with another 1,600 cuts planned next fiscal year. The company is also closing four game studios as Xbox leadership acknowledges the business is "not healthy."
Microsoft's Xbox division is undergoing major restructuring. The company will lay off 1,600 workers now, with an additional 1,600 positions cut over the next fiscal year. Four studios will be shuttered as part of the overhaul.
Xbox CEO Asha Sharma defended the cuts in an internal memo, stating the business is "not healthy" and that the division had "spread ourselves too thin." Speaking to Fortune, she elaborated on the strategic issues facing the unit.
The layoffs represent a significant contraction for Xbox, which has faced mounting pressure in the gaming market. The division's unclear strategic direction compounds challenges, as Microsoft attempts to refocus its gaming efforts.
These cuts raise questions about Microsoft's long-term commitment to gaming hardware and software. The company has been investing heavily in game development and acquisition over recent years, making the sudden reversal notable.
Industry observers note that if Microsoft were to divest Xbox entirely, few buyers exist at the scale required. The division's infrastructure, game studios, and intellectual property make it a valuable but specialized asset. Potential acquirers would need deep pockets and gaming expertise.
Microsoft has not indicated plans to sell Xbox outright, instead focusing on internal restructuring. The company remains committed to Game Pass and cloud gaming initiatives as part of its broader strategy.
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