Technology company Microsoft has announced plans to cut about 3,200 workers and offload four of its Xbox game studios.

The development was announced on Monday in a post on X by Asha Sharma, the executive vice president of Microsoft and chief executive officer of Xbox, Microsoft’s gaming brand.

Ms Sharma announced that the decision to restructure Xbox was difficult, adding that the move would eliminate 1,600 roles and four studios on the day of the announcement. 

“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,” Ms Sharma said.

“This will include approximately 1,600 role eliminations today, and in addition, four studios will leave Xbox to new management.”

“I recognise that a year-long restructuring creates additional challenges. Unfortunately, it is not possible to make all the necessary changes in a single day, and I wanted to be direct about the scale,” she said.

Ms Sharma acknowledged that the decision was painful, particularly because it would affect people who poured their creativity into building Xbox.

“Many joined us through acquisitions, while others were recruited here, or sought us out because they loved this industry and loved Xbox. Today’s decisions do not reflect their talent or dedication,” she said.

She explained that the company had been running at margins lower than those of other comparable platforms and publishing businesses. 

She said, “Our business today is not healthy. We are operating at margins that are three–10x lower than comparable platform and publishing businesses. We entered Gen 9 with a smaller install base and a higher cost structure. To grow, we bet on Game Pass, multi-platform, and a broader portfolio of content.

“While those businesses have created meaningful value, they did not grow at the pace we expected. As that happened, our core business weakened, and we added more teams, more investment, and more time, hoping for a better outcome. And now the industry is facing the most severe hardware crisis in its history. We must reset the Xbox.”

Ms Sharma said the restructuring would be guided by three key initiatives: resetting the content portfolio, resetting the platform, and restructuring operations.

“These changes are about a bigger future for Xbox, not a smaller one. The next decade of gaming will be larger, more global, and more creative than anything we’ve seen before.”

“I want XBOX to be one of the few companies that entertains more than a billion people each day and gives everyone the opportunity to create and connect. I know we can achieve this goal,” she stated.

Also, Microsoft’s chief people officer, Amy Coleman, in an internal memorandum to employees, said the decision was prompted by the need to adjust resources and roles and shift how the company operates amid the impact of artificial intelligence on tech companies. 

“I also want to be direct that the roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done.

“Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves.

“We are still early on this journey, and there will be more changes ahead; other parts of our business will need to make similar changes,” Ms Coleman said.