OUCH: Microsoft cuts 4,800 jobs, as Xbox unit downsizes and plans to spin off four gaming studios.

Microsoft is eliminating 4,800 jobs, representing 2.1% of its workforce, with the company’s Xbox division losing about one-fifth of its staff in the software giant’s latest effort to cut costs in the era of artificial intelligence.

“The way technology is built, deployed, and used is transforming faster than at any point in my time here,” Amy Coleman, Microsoft’s chief people officer and a 27-year company veteran, wrote in a message to employees Monday.

Xbox is cutting 3,200 people through fiscal year 2027, Xbox CEO Asha Sharma wrote in an email to division employees, noting that 1,600 roles would be eliminated on Monday. The other 1,600 exiting is on top of the companywide total of 4,800 leaving immediately.

“I recognize that a year-long restructuring creates additional challenges,” Sharma wrote. “Unfortunately, it is not possible to make all the necessary changes in a single day.”

The cuts amount to 20% of Xbox employees leaving, according to a person familiar with the matter, who asked not to be named in order to discuss internal changes.

“We will return to growth in 2027,” Sharma wrote.

Microsoft spins the cuts as AI-related, but the company’s Xbox division is in trouble, and has been for a while: Former Microsoft Executive Issues Dire Warning About Xbox Consoles.