Microsoft announced it will cut approximately 4,800 jobs, representing 2.1% of its global workforce, as the tech giant refocuses resources toward artificial intelligence infrastructure. The layoffs, confirmed in an internal memo from Chief People Officer Amy Coleman, hit hardest the Xbox gaming and commercial sales teams. About 1,600 of the cuts are within Xbox, and the division plans to eliminate nearly 20% of its roles by July 2027, totaling around 3,200 positions, according to Xbox CEO Asha Sharma.
The restructuring includes spinning off four gaming studios—Double Fine, Compulsion Games, Ninja Theory, and Undead Labs—with a fifth, Arkane, under review for possible sale or closure. Sharma told staff the gaming business is "not healthy," noting margins three to ten times below rivals and a historical loss of 64 cents per dollar invested. Investors appeared unsettled: Microsoft shares fell 1% on Monday, erasing earlier losses, and are down 18% year-to-date, as markets remain fixated on escalating AI capital expenditure rather than cost savings from layoffs.
Wolfe Research cut its MSFT price target to $525 from $570, citing rising memory costs, and now expects fiscal 2027 capex of $270 billion, up from $230 billion. This led to a forecast of negative $17.4 billion free cash flow. Despite the headwinds, the firm kept an Outperform rating, predicting Azure revenue growth of over 40% in the next two fiscal years.
The layoffs come as several crypto-focused firms have also trimmed staff in recent months. Coinbase and Block have each shed jobs, mirroring a broader tech sector trend where companies redirect resources toward AI and core operations. While the crypto market itself showed no immediate reaction, the ongoing workforce reductions across both traditional and crypto tech hint at a shared pressure to fund AI ambitions without sacrificing margins.
