Microsoft Cuts 3200 Xbox Jobs and Sells Studios in Major Gaming Reset
Microsoft announced it is cutting 3,200 jobs from its Xbox division, about 20 percent of the workforce, with 1,600 positions eliminated immediately and the rest by 2027. Studios including Compulsion Games and Double Fine are being sold. CEO Asha Sharma cited bloated management, underperforming Game Pass, and low margins as the reasons.
Microsoft announced on July 7, 2026, that it is cutting 3,200 jobs from its Xbox division, roughly 20 percent of the gaming workforce. The company eliminated 1,600 positions immediately, with the remaining cuts scheduled by 2027.
Xbox CEO Asha Sharma cited bloated management structures, underperforming Game Pass subscription numbers, and low profit margins as the drivers behind the decision. The company is selling studios including Compulsion Games and Double Fine as part of the restructuring.
Microsoft is narrowing its gaming focus to its strongest franchises. Halo and Call of Duty will receive the bulk of the division's resources going forward.
The cuts come as Microsoft spends heavily on artificial intelligence infrastructure. The company is building out its Azure cloud platform to meet surging demand for AI compute, and the gaming division's margins have struggled to keep pace with those investments.
Anthropic signed a 20-year data center lease with TeraWulf in Kentucky on July 7, the same day as the Xbox announcement, underscoring how AI infrastructure spending is reshaping priorities across the tech sector.
Amazon separately announced plans to raise at least 25 billion dollars in bonds to fund AI data center expansion. The capital-intensive nature of AI is forcing companies across the industry to make hard choices about where to allocate resources.
Microsoft also launched the Frontier Company, a 2.5 billion dollar consulting unit aimed at helping enterprise clients deploy AI systems.
