Microsoft Set to Announce Layoffs in Xbox Division Amid Restructuring Push
Tech giant Microsoft is preparing for another round of layoffs, this time reportedly targeting its Xbox division, according to a recent report by Bloomberg. This marks the fourth round of job cuts for the company in the past 18 months, highlighting a continuing trend of cost-cutting and structural realignment amid the company's shifting priorities towards AI and infrastructure development.
Xbox Division Faces Uncertainty
Managers in Microsoft’s Xbox division have been informed to brace for significant layoffs that are expected to be announced in early July 2025, coinciding with the end of the company’s fiscal year. As of now, there has been no official confirmation from Microsoft regarding the number of roles impacted or the exact departments that will be affected.
This round of layoffs is widely perceived as part of a company-wide restructuring effort, particularly in the aftermath of Microsoft’s massive $69 billion acquisition of Activision Blizzard in 2023. The Xbox unit has been under mounting pressure to boost profitability post-acquisition.
Recent Layoffs and Restructuring Moves
This upcoming round of job cuts will follow three previous major layoffs since early 2024:
- May 2025: Microsoft cut over 6,000 jobs, mainly from product and engineering teams.
- September 2024: Xbox laid off 650 employees, with roles primarily in corporate and support functions. These layoffs were described by Xbox chief Phil Spencer as part of the "post-acquisition team structure" realignment.
- Earlier in 2024: Two more rounds of layoffs affected multiple subsidiaries, as Microsoft sought to streamline operations.
These decisions come amid Microsoft’s massive financial and resource investment in artificial intelligence (AI) infrastructure, including cloud data centers and AI model development. The company has committed billions of dollars into its AI initiatives, including partnerships with OpenAI, and a growing emphasis on Copilot AI tools across its product suite.
Sales Teams Also in the Line of Fire
A report earlier this month indicated that Microsoft was planning to lay off thousands of employees, especially in its sales division. While the timeline for these layoffs remains fluid, insiders say the changes will likely take effect in early July, just after the fiscal year closes.
With a global workforce of 228,000 as of June 2024, Microsoft employs around 45,000 workers in sales and marketing. Notably, these teams were largely spared during the May layoffs, but may now face cuts in the upcoming wave.
Xbox Under Strategic Scrutiny
Following the Activision Blizzard deal, Microsoft has made aggressive moves to consolidate and realign its gaming and entertainment portfolio. The emphasis has shifted from expansion to profitability, according to sources close to the matter.
The September 2024 layoffs within Xbox reflected that shift, targeting backend roles rather than frontline development teams. Analysts suggest the upcoming layoffs may affect a wider segment, including roles tied to Xbox’s broader ecosystem — such as marketing, support, and platform integration teams.
Tech Industry Layoffs Continue to Mount
Microsoft's ongoing restructuring aligns with a broader trend in the global tech industry, which has been grappling with waves of layoffs as companies adjust to post-pandemic realities and economic headwinds.
According to layoffs.fyi, a platform that tracks real-time tech layoffs, as of June 26, 2025, 147 companies have laid off a combined 63,443 employees this year alone.
Among the most significant were:
- Intel, which announced in April plans to cut up to 20% of its workforce, affecting an estimated 22,000 employees.
- Meta, Amazon, Salesforce, and other major players have also implemented rounds of job cuts to realign business priorities around AI, automation, and operational efficiency.
Why Microsoft Is Doubling Down on AI
Microsoft’s leadership sees AI not just as a feature enhancement, but as the core of its future business model. With the ongoing success of its Azure AI and Copilot tools, Microsoft has been scaling back traditional operations to free up capital and human resources for its AI expansion.
In recent months, the company has launched AI features across Windows, Office 365, and even its developer ecosystem, and is rapidly building infrastructure to compete with cloud giants like Amazon Web Services and Google Cloud.
The company’s CFO has openly said that operational "efficiencies" are essential to funding its next wave of innovations.
What It Means for Employees and Gamers
For employees, the next few weeks are likely to be filled with uncertainty, especially for those within Xbox, sales, and supporting corporate functions. Microsoft has pledged support for laid-off workers in previous rounds, including severance packages and job placement services, but the overall morale remains a concern.
For gamers, the impact may not be immediate, but long-term restructuring within Xbox could affect content pipelines, support services, and platform strategies. However, with heavy investments still ongoing in major franchises acquired via Activision Blizzard — such as Call of Duty and World of Warcraft — Microsoft is unlikely to scale down its development ambitions.
Final Takeaway
Microsoft’s expected layoffs, particularly in the Xbox division, highlight a critical moment for the company as it balances legacy operations with future innovation. As AI becomes the centerpiece of Microsoft’s growth strategy, departments not directly aligned with these goals may continue to face reductions.
The tech industry’s shift toward leaner, AI-driven operations is not slowing down — and Microsoft appears intent on leading that transition, even if it comes with painful short-term sacrifices.
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