Xbox Braces For Fourth Major Layoff Round In 18 Months As Microsoft Pivots To AI

Microsoft Corp. MSFT is reportedly preparing for significant layoffs within its Xbox division, with cuts expected to be announced as early as next week.

Bloomberg reported on Tuesday, citing unnamed sources, that this move represents the Xbox division’s fourth major round of layoffs in the past 18 months.

Xbox has struggled to boost profit margins since the Activision Blizzard acquisition.

Also Read: Microsoft Fires Hundreds More Workers Amid AI-Fueled Growth, Calls It Positioning The Company For ‘Success’

This round of layoffs at Xbox aligns with a larger trend across Microsoft. Recent reports indicated Microsoft’s plans to cut thousands of jobs, primarily in its sales division, as the company streamlines operations and reallocates resources.

Adding to the economic pressures, a report in May 2025 indicated Microsoft’s plans to raise Xbox console prices globally. This strategic pricing adjustment, with U.S. models increasing by up to 27%, was explicitly aimed at mitigating the impact of the Trump administration’s tariffs on goods manufactured in countries like China, where Xbox consoles are primarily produced.

This move followed similar price hikes from direct competitors Sony Corp. SONY for its PlayStation 5 consoles and production delays from Nintendo Co. NTDOY for its upcoming Switch 2, indicating a broader industry response to increased manufacturing and supply chain costs.

Microsoft and other Big Tech giants, including Amazon.Com AMZN and Meta Platforms META, have been downsizing in thousands while ramping up their artificial intelligence bases.

Microsoft laid off 6,000 employees in May. As of June 2024, the company had 228,000 full-time employees, of which 55% were based in the U.S.

Further demonstrating its restructuring efforts, Microsoft ended its China joint venture Wicresoft in April 2025, resulting in the elimination of 2,000 jobs. The company has been consistently downsizing by thousands throughout 2024, indicating a sustained effort to optimize its operational footprint.

Looking back, Microsoft had also laid off 10,000 employees in early 2023, representing 4%-5% of its workforce at the time, citing a pandemic-induced slowdown in growth and a need to adjust to a new economic reality.

Despite these widespread layoffs in other areas, Microsoft remains heavily committed to AI. A March 2025 report indicated that while Microsoft shelved new data center projects in the U.S. and Europe, potentially amounting to 2 gigawatts of electricity, it remained firmly on track to spend about $80 billion building AI data centers this fiscal year. This significant investment underscores AI as a core strategic priority for Microsoft’s future growth and competitive edge.

MSFT Price Action: MSFT stock was trading higher by 0.58% to $488.94 at last check Tuesday.

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