Microsoft is continuing its organisational restructuring as it increases investments in artificial intelligence (AI), with the company announcing workforce changes affecting 4,800 employees, or around 2.1% of its global workforce. The latest move is part of a broader effort to align resources with long-term business priorities while expanding its AI capabilities.
A major portion of the restructuring impacts Microsoft’s Xbox gaming division, where around 3,200 roles are expected to be affected. About 1,600 employees were laid off on July 6. The company is also closing or reorganising up to 5 gaming studios after years of significant investment, including the acquisition of Activision Blizzard.
As part of the overhaul, Compulsion Games and Double Fine Productions will become independent studios, while Ninja Theory and Undead Labs will focus on expanding the Senua and State of Decay franchises. Arkane Studios has also started consultations with its workers’ union in France regarding its future.
Microsoft said the restructuring is intended to prioritise investments, people and resources in areas that will support future growth. The company recently launched Microsoft Frontier Company, backed by a $2.5 billion investment, to help enterprises deploy customised AI solutions.
Chief People Officer Amy Coleman clarified that the eliminated roles are not being replaced by AI but acknowledged that AI is transforming the way work is carried out across the company. She also warned employees that more organisational changes are expected in the coming months.
Analysts believe the layoffs are part of Microsoft’s strategy to control costs while shifting resources toward AI rather than a response to weak business performance. Earlier this year, the company also offered voluntary buyouts to around 9,000 employees in the US. Microsoft has projected AI-related spending of around $190 billion in 2026, while rising infrastructure and memory chip costs continue to increase operational expenses.
The broader technology sector is also witnessing similar restructuring. So far in July, nearly 6,000 jobs have been cut globally, including around 800 positions at CorroHealth, 300 at TikTok in Dublin, and major workforce reductions at Tokopedia following its acquisition.
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