Xbox CEO Says Business Is Not Healthy As Microsoft Cuts 3,200 Jobs
Xbox CEO Asha Sharma says the gaming business “is not healthy” as Microsoft launches its biggest-ever Xbox restructuring. The overhaul includes thousands of job cuts, leadership changes and a renewed focus on long-term profitability.
Microsoft's gaming division has entered one of the most significant transitions in its history after Xbox CEO Asha Sharma outlined the reasons behind sweeping job cuts and a major organisational overhaul. In an internal message to employees, Sharma acknowledged that the Xbox business is facing serious financial challenges, describing its current position as unsustainable and confirming that a large-scale restructuring is now underway. The announcement comes shortly after Microsoft revealed widespread layoffs across the company, with the Xbox division among the hardest hit as the technology giant reshapes its gaming strategy for the future. Xbox Begins Historic RestructuringAccording to the internal communication,Xboxis expected to reduce its workforce by approximately 20%, with around 1,600 employees leaving immediately and additional reductions planned over the coming months. In total, nearly 3,200 roles are expected to be affected as part of the restructuring programme. The move has been described as the largest organisational overhaul in Xbox's history, reflecting Microsoft's efforts to simplify operations, improve efficiency and strengthen the long-term sustainability of its gaming business. The restructuring extends beyond job reductions, with Microsoft also reviewing parts of its gaming portfolio and streamlining several business operations. Why Is Microsoft Restructuring Xbox?The internal message revealed that Xbox has been operating under increasing financial pressure despite the continued growth of the global gaming industry. Microsoftbelieves the existing structure has become too complex and costly, limiting the division's ability to compete efficiently over the long term. The company now plans to reduce management layers, simplify internal processes and concentrate investment on areas that deliver stronger commercial returns. The objective is to create a leaner organisation capable of responding more quickly to changes in the gaming industry while continuing to invest in key franchises, platform services and future innovations. Gaming Studios And Leadership ChangesAs part of the overhaul, Microsoft is expected to separate several gaming studios from its portfolio while reviewing additional businesses within the Xbox ecosystem. The company has also announced leadership changes aimed at creating a more unified operating structure across hardware, software and gaming services. These changes are intended to improve coordination across Xbox's various businesses while supporting long-term strategic growth. AI Investment Continues Alongside Cost-CuttingThe restructuring comes as Microsoft continues investing heavily in artificial intelligence, cloud infrastructure and next-generation technologies. Although the timing has prompted speculation that AI is replacing traditional roles, Microsoft has maintained that the Xbox layoffs are primarily driven by organisational restructuring rather than direct AI-related workforce replacement. Instead, the company says it is balancing significant investment in emerging technologies with efforts to improve operational efficiency across existing business units. This is an important email I sent today to all employees at XBOX:Team,We are beginning the most significant restructure in XBOX history. After careful consideration, I've made the difficult decision to reduce our team by approximately 3,200 throughout FY27. This will include…— ASHA (@asha_shar)July 6, 2026What It Means For XboxWhile the job cuts represent a difficult period for thousands of employees, Microsoft insists the changes are designed to position Xbox for future success in an increasingly competitive gaming market. The company remains committed to expanding its gaming ecosystem through Xbox consoles, Game Pass, cloud gaming and first-party content, but with a more focused organisational structure. As Microsoft enters a new phase of its gaming strategy, the current restructuring signals a clear shift towards profitability, efficiency and long-term sustainability. Whether these changes strengthen Xbox's position in the global gaming industry will become clearer as the company's new operating model begins to take shape over the coming months.