Tech giants, another 4,800 people are out of work

Zhi News, July 7. Local time on July 6, Microsoft announced that the company has recently laid off about 4,800 employees, accounting for 2.1% of its total global workforce. This round of layoffs primarily affected the Xbox and commercial sales divisions, with Xbox cutting 1,600 employees the same day and launching its largest restructuring in history. By fiscal year 2027, Xbox expects cumulative layoffs of approximately 3,200 people, representing roughly 20% of its total workforce.

▲ Microsoft announces 4,800 layoffs (Source: Microsoft)

Amy Coleman, Microsoft's Executive Vice President and Chief People Officer, emphasized that the eliminated positions were not replaced by AI, though AI is indeed transforming the way work is performed. Over the past year, Microsoft has reassigned more than 4,000 employees to new roles, including 500 who completed their transfers this month.

This round of layoffs comes after Microsoft increased its investment in enterprise AI deployment. The company recently launched the Frontier Company business unit focused on enterprise AI implementation, with a $2.5 billion (approximately 17 billion RMB) investment. While streamlining positions, the continued expansion of AI investment has become a common trend in this year's tech industry layoff wave.

According to TechCrunch, Microsoft offered voluntary separation packages to an undisclosed number of employees in April this year, estimated to affect around 5,500 people, with the goal of building a higher-performance team. Last year, Microsoft cut approximately 15,000 employees across two rounds. Statistics show that in the first half of 2026 alone, nearly 154,000 jobs have been lost in the tech industry, with major firms including Meta, Oracle, Amazon, and Cognizant laying off thousands or even tens of thousands of employees.

01.

Chief People Officer: 4,000 Internal Transfers in the Past Year

Positions Are Not Being Replaced by AI

Amy Coleman, Microsoft's Executive Vice President and Chief People Officer, stated that Microsoft has been seeking ways to minimize layoffs and reassign employees to new roles in areas that align with the company's highest priorities and greatest opportunities. Over the past year, Microsoft has reassigned more than 4,000 employees to new positions, including 500 who completed their transfers this month.

Due to changes in the external environment, Microsoft's business operations are continuously adjusting. Currently, the way technology is built, deployed, and utilized is changing at the fastest pace since she joined the company. At the same time, customer demands are shifting, and the business models for serving these customers are evolving, so Microsoft's work itself—including what it does, where it focuses, and how it organizes—must also transform accordingly.

Coleman emphasized that the positions eliminated today have not been replaced by AI, but AI is indeed changing work patterns. Currently, some of Microsoft's routine daily tasks can be automated, which means all employees need to engage in continuous learning, master new skills, and adapt as work evolves.

As reported by TechCrunch, this layoff occurred after Microsoft recently launched the Frontier Company business unit. This division focuses on enterprise AI deployment, where Microsoft will leverage existing AI tools and a team of pre-deployment engineers to help enterprise customers implement AI solutions. Microsoft has allocated $2.5 billion (about 17 billion RMB) to this business. This reflects a common phenomenon in this year's tech industry layoff wave: companies are simultaneously cutting jobs and increasing AI investments.

02.

Xbox Cuts 1,600 Employees on the Same Day

Cumulative Layoffs Will Reach 3,200 by Fiscal Year 2027

Of the approximately 4,800 positions Microsoft eliminated on July 6, Xbox accounted for 1,600. Asha Sharma, Xbox's CEO, shared an internal letter sent to employees on the social platform X. Xbox is undergoing its most significant restructuring in history, with an expected total of around 3,200 positions to be eliminated by fiscal year 2027.

▲ Xbox CEO Asha Sharma publicly releases Xbox's internal restructuring letter

Sharma stated frankly that Xbox's current business is not healthy, with profit margins 3 to 10 times lower than other platforms. Xbox previously bet on the monthly subscription service Game Pass, while expanding its content portfolio and increasing cross-platform distribution efforts, hoping to inject growth momentum into the business. However, these strategies did not achieve the expected growth rates, and as Xbox expanded its teams and investments, its core business instead weakened.

In her view, Xbox has reached a stage where a reset is necessary. On one hand, the gaming industry is facing its most severe hardware crisis in history; on the other hand, Xbox needs to narrow its business focus, reduce large-scale creative projects that are unlikely to deliver platform-level returns, and concentrate resources on core strategic pillars such as *Minecraft* and *Candy Crush Saga*.

As part of the adjustments, Microsoft will transfer 4 game studios to new management teams, while retaining related intellectual property and ongoing projects. Compulsion Games and Double Fine Productions will become independent studios again; Ninja Theory and Undead Labs will be placed under new ownership and receive financial support to continue developing their popular game projects.

At the organizational level, Xbox will also drastically reduce management layers, compressing the current maximum 14-level management structure to no more than 5 levels, ideally down to 3 levels. As part of this major organizational restructuring, Xbox appointed long-time executive Helen Chiang as Chief Operating Officer, who will have end-to-end profit and loss authority over content, hardware, platforms, and services.

The Xbox layoffs come at a time when the overall gaming industry is contracting, while generative AI presents new opportunities. Over the past year, companies developing world models such as Google DeepMind, World Labs, General Intuition, Luma AI, and Runway have secured substantial financing, and their demonstrated playable world models have received widespread attention. These companies believe that gaming will be one of the most feasible scenarios for world models to achieve commercialization in the near future.

03.

Conclusion: Behind Microsoft's Layoffs

AI Investment and Organizational Contraction Occur Simultaneously

Although Microsoft claims that "the positions behind this round of layoffs were not replaced by AI," AI itself is indeed a key factor driving organizational adjustments. From increasing AI investment in the Frontier Company business unit to streamlining the commercial sales and Xbox teams, it is clear that Microsoft is reallocating resources: on one hand, directing more efforts toward enterprise AI implementation, and on the other, scaling back businesses that have underperformed growth expectations or face margin pressure.

Specifically, eliminating positions, spinning off studios, compressing management layers, and strengthening profit and loss responsibilities all point to the same goal: reducing low-return projects and concentrating resources on businesses that can better support long-term platform growth. Microsoft has not simply attributed the problem to AI, but the organizational pressure brought about by AI transformation has begun to concretely affect individual positions, teams, and business lines.

Sources: Microsoft, TechCrunch, X

This article is from the WeChat Official Account "Zhi News", Author: Yang Jingli, Editor: Li Shuiqing, published with authorization from 36Kr.