Microsoft announces 4,800 layoffs, including 3,200 Xbox roles, and studio spinoffs

Earlier this week, Twitch streamer and gamer Joshua Khane went viral with a post calling out Microsoft for deleting his account and OneDrive. Khane noted that Microsoft acknowledged that the account had been compromised, but it declined to help him recover "25 f***ing years of data, thousands of Euros [spent] on games" and his "son's baby pictures." Now, after a massive outcry, Xbox Support has changed course and reached out to Khane to help him regain access to his account. In a message posted on X, a Microsoft representative apologized to Khane and stated that its team has "been working to restore access to your purchases and reached out with the next steps." https://twitter.com/XBOXSupport/status/2077401588394529030 While Khane acknowledged the reply, other users have come forward to state that they've received the same form statement from Microsoft in the past. And unlike Khane, the company apparently didn't respond to their requests about restoring their accounts. https://twitter.com/ThatHyperZack/status/2077533019783516214 https://twitter.com/Helpma2/status/2077463287969542652 https://twitter.com/DeadpoolCentral/status/2077441981710565689 https://twitter.com/Obaid_Ghubash/status/2077491908440740286 https://twitter.com/AsmadiGames/status/2077501079319674971 Microsoft was already suffering a public relations beating this month after another round of mass layoffs in the gaming division that affected 1,600 workers, with more to follow. The planned cuts will affect roughly 20% of Microsoft's Xbox workforce. Two of Microsoft's studios, Double Fine and Compulsion Games, are going independent as a result of the cutbacks. Ninja Theory and Undead Labs are being sold to new buyers, while the fate of Arkane remains up in the air. Senator Bernie Sanders slammed Microsoft for the layoffs in the wake of the company posting $100 billion in profit in 2025. He also called the company out for its plans to hike the price of Xbox consoles again later this summer.

Since news broke of Microsoft's recent round of mass layoffs--which affected 1,600 people immediately and will reach double that number over the next year--a number of reports have claimed that mass approvals of foreign-worker visas were behind the decision. Now, Microsoft communications lead Frank X. Shaw has refuted what he calls "bad information." In a Twitter post, Shaw said that while there are Microsoft workers using H-1B visas, they are "not specific to Xbox and represent a small percentage of Microsoft's overall workforce. And the majority of the roles impacted were not American roles." https://twitter.com/fxshaw/status/2075637298046374135 "Recent workforce changes were made to restructure the Xbox business because it is not healthy. They were not made to replace employees with foreign workers," Shaw said. Shaw's comments come after multiple conservative news outlets pointed out that Microsoft was approved for more than 2,200 H-1B visas this year. Fox News was told by Microsoft prior to publishing its story that H-1B employees were also among those affected by the layoffs. The recent Xbox layoffs are among the biggest we've ever seen in the gaming industry. Alongside losing roughly 20% of the Xbox workforce, Microsoft also made the decision to separate from five studios. Two of these--Double Fine and Compulsion Games--will return to operating as independent studios. Ninja Theory and Undead Labs, meanwhile, are being sold to a currently unknown buyer, and Microsoft is currently reviewing options with Arkane for its sale or separation. The studios that remain operational were still heavily impacted by the layoffs, however. Among the worst-hit, at least that we know of, was id Software, which lost roughly half its headcount just as it launched the latest Doom: The Dark Ages expansion.

Remaining employees on tenterhooks.Xbox may have avoided the PR disaster of studio closures this week, but by extending its layoffs over the course of the coming fiscal year, it’s leaving any remaining staff to work under a cloud.The company cut 1,600 jobs across its division on Monday, with a further four first-party studios being spun-off or sold.Read the full article on pushsquare.com

What Xbox's layoffs, massive reboot say about the gaming industry  KUOWMicrosoft Is Cutting More Than 3,000 Jobs in Xbox Division  WSJResetting XBOX  XBOX WireRumors of the DOOM studio's demise are premature — here's why  Windows CentralFury erupts as US brand fires 1,600 employees after securing thousands of foreign worker visas  Fox News

Microsoft announced yesterday it would lay off 4,800 staffers, including 1,600 roles that were eliminated from its Xbox division yesterday. An additional 1,600 roles will be eliminated at Xbox through the fiscal year. In an email to staffers, Xbox CEO Asha Sharma said the company “bet on [subscription service] Game Pass, multi-platform, and a broader portfolio of content” to progress, but that “they did not grow at the pace we expected.”  In the email, Sharma also announced structural changes to the company. Xbox’s corporate vice president of product services Dave McCarthy would leave his role after eight years. Helen Chiang, the corporate vice president of Minecraft, was named as the company’s COO—a newly formed role that includes “end-to-end P&L responsibility across content, hardware, platform, and services.”  In the past, the company’s studios and teams operated independently. Chiang would “bring our businesses together under one operating model,” Sharma outlined, “making sure we make clear investment decisions, learn from our successes and failures, and hold ourselves accountable for results.” Before the layoffs were announced, other Xbox heads stepped away from the company. In June, Xbox Game Studios head Craig Duncan stepped down from his role after joining the team in November 2024. The company’s chief of staff Louise O’Connor also departed from the company. Fast Company reached out to Xbox for comment. As part of “the most significant restructuring in Xbox history,” many staffers with decades of experience at Microsoft and Xbox had their roles eliminated.  One of those Xbox employees was Kevin LaChapelle, who, according to his LinkedIn profile, joined Microsoft in 1989 as a software designer engineer and worked his way up the ranks to vice president and general manager for xCloud, which became Xbox Cloud Gaming. The 37-year Microsoft veteran helped spearhead the development of backwards compatibility, a feature that lets modern consoles play video games made for older Xbox systems.  “I will add my name to the list of people who were laid off today at Xbox,” LaChapelle wrote in a LinkedIn post. “This ends my 37 years at Microsoft.” “I have worked in many different parts of the company, and I will say my fondest memories are of leading the team of very talented engineers who built the Xbox Backward Compatibility program,” LaChapelle wrote. “Sitting in the auditorium when Phil announced the program at E3 2015 was incredible. The audience’s reaction was unbelievable. I followed that with leading the team who created our Cloud Gaming product.” “I am a firm believer that all entertainment will eventually become streamed to you wherever you are,” LaChapelle added. “I look forward to watching how Xbox evolves going forward and I wish the team nothing but success.” In response to a comment about his tenure at Microsoft, LaChapelle said: “there aren’t many of us that have lasted this long. I’m waiting for [the] final count, but I am guessing I am leaving around 40 on the company seniority list.” LaChapelle declined Fast Company’s request for comment. While the industry knew Xbox was struggling, the scale and timeline of the cuts—and the studio closures—took some by surprise.  Microsoft-owned ZeniMax Media was not one of the impacted development studios, but the union of its subsidiary Bethesda Game Studios said in a Bluesky post that “many” of its development team were impacted by the layoffs. “Yesterday’s layoffs at Bethesda Games Studios were not a cut of ‘14 management layers,’” the union wrote in a separate post. “We lost dozens of programmers, artists, designers and testers. Many of whom worked at BGS for decades.”

The recent layoffs at Microsoft, including deep cuts at Xbox, impacted 4,800 people across the business. One of the staffers let go was Kevin LaChapelle, a 37-year Microsoft veteran who helped bring to market one of the best, most-beloved features in Xbox console history: backwards compatibility. LaChapelle, who was the vice president of the Xbox platform, confirmed on LinkedIn that he was part of the cuts. He started at Microsoft in 1989 as a software designer engineer, and moved to different parts of the business over the decades. He started working on Xbox during the Xbox 360 days and later became a software engineering manager where he led the team responsible for delivering the popular backward compatibility program on Xbox One. This was the popular feature, announced at E3 2015, that allowed Xbox One owners to play Xbox 360 titles on the newer platform and later Xbox Series X|S as well. "Sitting in the auditorium when Phil announced the program at E3 2015 was incredible. The audience's reaction was unbelievable," he said. https://www.youtube.com/watch?v=cCGKATko82U An update in November 2021 that added 70+ games, including original Xbox and Xbox 360 games, was the final update to the backwards compatiblity catalog. After that, LaChapelle became the vice president and general manager for xCloud, which would become Xbox Cloud Gaming. In that role, he led the team from conception to launch, and LaChapelle is still a big believer in streaming for games. "I am a firm believer that all entertainment will eventually become streamed to you wherever you are. I look forward to watching how Xbox evolves going forward and I wish the team nothing but success," he said. One of the reasons Microsoft is making these cuts is because some of its strategic bets, including Xbox Game Pass, did not work out. Part of the reason why, experts said, was because Microsoft failed to convince PC and cloud users to sign up for Game Pass. The 4,800 layoffs at Microsoft amounted to about 2.1% of the company's global headcount. At Xbox specifically, 1,600 people lost their job this week, with another 1,600 set to be laid off in the next year, Microsoft said. In addition to layoffs, Microsoft is divesting of at least five studios. Ninja Theory and Undead Labs have been sold to unnamed buyers, while Compulsion Games and Double Fine are going independent again. Arkane Lyon has entered "consultation" under French labor rules, and that process will decide the fate of the developer and its in-development game, Marvel's Blade.