The restructuring of the gaming division will include 3,200 job reductions, with 1,600 employees laid off on Monday.
Despite spending tens of billions of dollars to expand Xbox including its landmark acquisition of Activision Blizzard.Microsoft has struggled to close the gap with Sony's PlayStation and Nintendo, prompting the company to reassess its gaming strategy.
In recent years, Microsoft has increasingly shifted its focus toward making Xbox games available on multiple platforms, rather than relying on console-exclusive titles to drive Xbox hardware sales.
In a memo to employees, Asha Sharma, the newly appointed head of Xbox, confirmed that the restructuring will involve the closure of four game studios.
Microsoft's stock fell 1.4% on the day of the announcement, after already declining 23% during the first half of 2026, marking its worst first-half performance since 2022.