Microsoft's Xbox cuts 3,200 jobs, says 'we lost 64 cents for every dollar we invested'

Microsoft's Xbox cuts 3,200 jobs, says 'we lost 64 cents for every dollar we invested' Daniel Howley · Technology Editor Updated Tue, July 7, 2026 at 4:25 PM GMT+2 3 min read MSFT Microsoft ( MSFT ) on Monday announced it is cutting 4,800 roles across the company, roughly 2. 1% of its workforce. The bulk of the layoffs, 3,200, will come from Microsoft's Xbox division.

  According to Xbox CEO Asha Sharma, the first round of cuts includes 1,600 employees today. The company is also moving four studios — Ninja Theory, Undead Labs, Compulsion Games, and Double Fine Productions — to outside management and is working to sell or spin off a fifth, Arkane Studios, in France. "Our business today is not healthy.

We are operating at margins that are 3-10x lower than comparable platform and publishing businesses. In a typical year, we lost 64 cents for every dollar we invested," Sharma wrote in an email to employees . Sharma, who took the reins of Microsoft's gaming division in February, has made several statements over the last few months about working to address Xbox's shortcomings.

She's also taken steps to reduce the price of the company's subscription gaming service and improve branding. But Monday's move was her most consequential yet. According to the Xbox chief, Microsoft entered the latest console generation with a smaller install base and higher costs than competitors like Sony ( SONY ) and Nintendo ( NTODY ).

The company then sought to invest in other services, including expanding its portfolio to put first-party games on rival systems and growing its Game Pass service, but the moves didn't pay off as Microsoft had hoped. Sharma also noted that some work within the division passes through 14 layers of management and that its platform teams have grown by 40% since the start of this console generation. The CEO said she intends to reduce those layers to "no more than 5, and where possible, 3.

" The video game industry, like the rest of the consumer technology market, is facing an unprecedented memory and storage crisis . Microsoft has raised prices on its Xbox consoles to contend with the rising cost of the components, as have Sony and Nintendo. Shares of Nintendo have collapsed 52% over the last 12 months, with Sony declining 17%.

Apple ( AAPL ) has also increased the prices of several of its products, including its MacBooks and iPads. In a note to employees, Microsoft chief people officer Amy Coleman said that none of the roles being cut will be replaced by AI, but said that the technology is changing how work is done. "Our customers are navigating this same shift, and they're counting on us to help them through it.

We can't do that well unless we're doing it ourselves. This comes down to two commitments: making the decisions needed to drive differentiated customer value, and supporting the people affected by them," Coleman wrote. Story Continues Microsoft has been beset by investor concerns about its AI spending, as well as fears that AI labs could supplant the need for its productivity tools, including Microsoft 365.

Microsoft's stock is down 20% year to date. Google parent Alphabet ( GOOG , GOOGL ) stock is up 14%, while Amazon ( AMZN ) is up 5%. Sign up for Yahoo Finance's Week in Tech newsletter.

· Yahoo Finance Email Daniel Howley at dhowley@yahoofinance. com. Follow him on Twitter at @DanielHowley .