Microsoft Is Eliminating 4,800 Jobs — Including 20% of Its Xbox Staff: ‘We Will Return to Growth in 2027.’

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Microsoft is having a hard year. The tech giant is down 19% in 2026 as investors question if its AI investments are paying off. Xbox revenue has been shrinking, a Netflix-style gaming subscription service has fallen well short of expectations, and the company cut 9,000 jobs last year.

Now comes another black eye. Microsoft is eliminating 4,800 jobs — 2.1% of its total workforce — with Xbox bearing the heaviest blow, losing roughly 20% of its staff through fiscal year 2027, according to CNBC.

The response goes beyond cutting headcount. Four Xbox gaming studios are going independent — Compulsion Games and Double Fine Productions will become standalone companies again, while Ninja Theory and Undead Labs have entered into terms to join new ownership. Microsoft is also leaning on AI to automate operational processes and squeeze more efficiency out of existing resources.

On the future forecast, Xbox CEO Asha Sharma said in a company email: “We will return to growth in 2027.” Meanwhile, Microsoft’s chief people officer wrote that AI isn’t replacing laid-off workers, while also admitting that “some tasks we do every day can now be automated.”