Microsoft kicked off its 2026 fiscal year on July 2, 2025, by announcing it will cut approximately 9,000 jobs—just under 4% of its global workforce—across multiple divisions, including sales, Xbox, and global operations. The move continues a broader restructuring effort aimed at flattening management layers and refocusing resources on high-growth areas.
Previous reductions this year included a sub-1% performance-based cut in January, over 6,000 roles in May, and at least 300 more in June, underscoring Microsoft’s commitment to streamlining its structure for greater agility.
Gaming and Xbox: The New Growth Drivers
As Microsoft trims headcount, it is simultaneously doubling down on its gaming business—viewed internally as one of the company’s key engines for future expansion:
- July 2025 Game Pass highlights such as Tony Hawk’s Pro Skater 3 + 4 and High on Life demonstrate day-one blockbuster releases for subscribers, cementing Game Pass as a must-have service.
- The June Xbox Games Showcase unveiled the new ROG Xbox Ally handhelds, first-party titles like Call of Duty: Black Ops 7, and long-awaited sequels such as The Outer Worlds 2 and Grounded 2, signaling a hardware and software push designed to captivate players everywhere.
Microsoft’s CEO Satya Nadella has consistently emphasized that resource realignment is essential in a dynamic market. By reducing headcount in certain corporate layers, the company can:
- Free up budget to invest in cloud infrastructure, AI integration, and gaming content.
- Accelerate decision-making by flattening reporting hierarchies.
- Position Xbox and Game Pass at the core of its consumer strategy, leveraging subscription-based recurring revenue.
This management-layer reduction mirrors moves by peers like Amazon and Meta aiming to stay nimble amid slowing global tech spending.
Implications for Employees and the Gaming Community
For affected employees, Microsoft has outlined severance packages, career counseling, and internal placement efforts. Across the Xbox organization, some roles will shift from traditional product marketing and sales to focus on content acquisition, cloud streaming, and community engagement.
For gamers, the reallocation of resources should translate into:
- Larger, more frequent Game Pass day-one releases.
- Continued hardware innovation, from consoles to handhelds.
- Expanded cloud-gaming experiences via Xbox Cloud and new partners like ASUS.
Also, The Verge got a copy of the internal memo that Microsoft Gaming CEO that shared with all the Xbox business, Xbox Game Studio and Activision Blizzard King:
Today we are sharing decisions that will impact colleagues across our organization. To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness. Out of respect for those impacted today, the specifics of today’s notifications and any organizational shifts will be shared by your team leaders in the coming days.
I recognize that these changes come at a time when we have more players, games, and gaming hours than ever before. Our platform, hardware, and game roadmap have never looked stronger. The success we’re seeing currently is based on tough decisions we’ve made previously. We must make choices now for continued success in future years and a key part of that strategy is the discipline to prioritize the strongest opportunities. We will protect what is thriving and concentrate effort on areas with the greatest potential, while delivering on the expectations the company has for our business. This focused approach means we can deliver exceptional games and experiences for players for generations to come.
Prioritizing our opportunities is essential, but that does not lessen the significance of this moment. Simply put, we would not be where we are today without the time, energy, and creativity of those whose roles are impacted. These decisions are not a reflection of the talent, creativity, and dedication of the people involved. Our momentum is not accidental—it is the result of years of dedicated effort from our teams.
HR is working directly with impacted employees to provide severance plan benefits (aligned with local laws), including pay, healthcare coverage, and job placement resources to support their transition. Employees whose roles were eliminated are encouraged to explore open positions across Microsoft Gaming, where their applications will be given priority review.
Thank you to everyone who has shaped our culture, our products, and our community. We will move forward with deep appreciation and respect for all who have contributed to this journey.
Phil
Microsoft’s July 2 announcement marks a pivotal moment: while it streamlines legacy operations, the tech giant is betting big on gaming as a cornerstone of its long-term growth. As Xbox hardware and Game Pass ecosystems expand, both employees and gamers alike will watch closely to see if this strategic pivot delivers on its promise of “gaming everywhere, for everyone.”
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