Microsoft is planning to lay off fewer than 2.5% of its approximately 228,000 full-time employees in a new round of job cuts expected to be announced by the week of June 30, 2026, or shortly thereafter [1, 2, 3, 4]. The layoffs will affect thousands of roles across sales, consulting, and notably the Xbox gaming division [1, 3, 5, 6].

This comes less than a year after Microsoft’s July 2025 layoffs that cut nearly 4% of the workforce and included gaming division reductions as well as studio closures [2, 3]. Xbox has faced mounting operational challenges, including pressured profitability, component shortages, and an overextended game studio system, prompting what CEO Asha Sharma called an “Xbox reset” in a June 10 memo [7]. Sharma said, “The console maker's slim profit margin was no longer sustainable” as Xbox attempts to restructure [8].

The new layoffs in Xbox could involve closing at least five game studios and canceling titles such as Marvel’s Blade, according to reports [8, 9, 7]. More than 3,500 Xbox workers have unionized with the Communication Workers of America (CWA) since 2022 under a neutrality framework approved by Microsoft, and union members are demanding protections including advance notice, recall rights, severance, and transfer options amid the cuts [8]. At a press conference, a unionized Xbox employee said, “We’re done paying for executives’ failures” as tensions rise over the layoffs [9].

Some Xbox studios are reportedly negotiating to spin off or go independent, though the fate of specific studios remains unclear [9]. Microsoft has been exploring options for Xbox that include a potential spinoff or restructuring as a wholly owned subsidiary [2, 3]. Meanwhile, Microsoft declined to comment on the pending layoffs and restructuring reports [2, 3, 5].

The tech sector broadly continues job reductions even as large investments in artificial intelligence infrastructure are underway. Amazon announced around 16,000 job cuts globally in 2026, and Meta cut 10% of its workforce [2, 3, 10, 11].

The expected layoffs at Microsoft likely will be the latest step in the company’s workforce adjustments, with an official announcement anticipated between late June and early July 2026 [1, 4, 6].